Lord Rothschild recently said this "World is seeing the greatest monetary policy experiment in history" he is the 4th generation of the Rothschild banking family part of the elite 1%. Source: https://www.rt.com/business/356148-rothschild-experiment-world-economy/ I always wonder why there is Global Deflation (NO inflation- falling consumer prices) while major Central Banks have been Printing Money like Crazy? Why Global Consumer Price has NOT SKY Rocketed? The answer is "Follow the flow of the newly Printed Money". Currently It flows directly to 1) the Stock Market 2) Bond Market!! Unfortunately none of them goes directly to consumers. Central Banks measure of inflation is Consumer Price Inflation. Not the stock Market Inflation. That is the reason why the Money Printing program has not been effective. Central bank's monetary policy is targeting the wrong area causing Stock market inflation. See the below most famous Stock index in the USA: Nasdaq: Dow Jones: The Inflation definition used by the RBA to determine the Interest Rate movement is Consumer Price Inflation (CPI) the cost of purchasing a representative 'basket of goods and services' over a period of time. Central Banks are hoping by injecting new money to the Stock Market and Bond Market hoping that Companies will start investing again and hoping Consumer will start spending again because of JOB & Wage Growth. But it doesn't work because Global consumer confidence is still LOW. Unfortunately, the stock market is now too addicted to money printing and low interest rate. The moment money printing stops and interest rate goes up; the stock market start to collapse. Which could potentially happens since the current position is nearly as high as the previous peak before the GFC in 2008-2009. The scary part is when Central Banks start Helicopter Money (fresh money Direct to Consumer), it will trigger real consumer inflation. Moreover, when the consumer is addicted to free Money, then there is no way to control inflation becoming Hyper Inflation. Here's some of the explanation from NAB: http://business.nab.com.au/wp-content/uploads/2016/06/2016-06-10-Helicopter-Money.pdf Luckily as per the last statement from the former RBA head Mr. Stevens, the chance is still slim for Australia to go with Helicopter money, but it is still on the table.
My 2 cents. I'd not be sleeping easy holding the bubble assets, ie stocks in Dow Jones/Nasdaq or government bonds. Helicopter money(to the consumer) will pump up commodity prices( because the consumer economy requires energy/materials to expand). Those bubble assets would have deflationary pressure (due to outflows seeking commodity exposure). Remember that if helicopter money comes the world - it comes to Australia too (without capital controls on commodity seeking money). If somehow Australia is cut off from helicopter money - the Aussie dollar exchange rates are going to be very different (ie very disruptive to overseas trade and thus the economy here).
My 3c The DOW is going substantially higher as the big money around the world is looking for shelter. The DOW is the premier index in the world, fund manager's are moving money there regardless of stock PE ratios etc. With all the turmoil in Europe this will only speed up IMO. A stronger USD will also eventuate because of the above capital flow movements. Where else is trillions of $ going to sit. Government bonds on the other hand - very toxic. People are loosing faith in their governments globally, and i suspect the bond bubble (government bonds) will soon backtrack as capital moves out (perhaps starting in the EU as we know that scene). B
