When The US’s Stock Market Bubble Bursts, Inevitable Disaster Will Follow

by | Sep 6, 2018 | Headline News | 26 comments


Complete and utter disaster will be inevitable and unavoidable when the United States’ stock market bubble bursts. Unfortunately, too many think the high stock market is evidence of a stable economy, but it’s actually an artificial bubble that will end in a disastrous crisis.

This unusual market strength is not evidence of a strong, organic economy, but of an extremely unhealthy, artificial bubble economy that will end in a crisis that will be even worse than we experienced in 2008, reported Forbes.  The current market is highly unstable due to an artificially low interest rate.

Forbes writer Jesse Colombo explained it well. Ultra-low interest rates help to create bubbles in the following ways:

  • Investors can borrow cheaply to speculate in assets (ex: cheap mortgages for property speculation and low margin costs for trading stocks)
  • By making it cheaper to borrow to conduct share buybacks, dividend increases, and mergers & acquisitions
  • By discouraging the holding of cash in the bank versus speculating in riskier asset markets
  • By encouraging higher rates of inflation, which helps to support assets like stocks and real estate
  • By encouraging more borrowing by consumers, businesses, and governments

Another Federal Reserve policy (aside from the ultra-low Fed Funds Rate) that has helped to inflate the U.S. stock market bubble since 2009 is quantitative easing or QE.  Many have warned about the negative effects of QE only to be told by leftists that it was “necessary.” When executing QE policy, the Federal Reserve creates new money “out of thin air” in digital form and uses it to buy Treasury bonds or other assets. That action pumps liquidity into the financial system. QE helps to push bond prices higher and bond yields/interest rates lower throughout the economy. QE has another indirect effect as well. It causes stock prices to surge because low rates boost stocks, wrote Colombo.

SP500 vs. Margin Debt As % of GDP

In a bubble, the stock market becomes overpriced relative to its underlying fundamentals such as earnings, revenues, assets, book value, etc. The current bubble cycle is no different: the U.S. stock market is as overvalued as it was at major generational peaks. According to the cyclically-adjusted price-to-earnings ratio (a smoothed price-to-earnings ratio), the U.S. stock market is more overvalued than it was in 1929, right before the stock market crash and Great Depression.

As shown in this report, the U.S. stock market is currently trading at extremely precarious levels and it won’t take much to topple the whole house of cards. Once again, the Federal Reserve, which was responsible for creating the disastrous Dot-com bubble and housing bubble, has inflated yet another extremely dangerous bubble in its attempt to force the economy to grow after the Great Recession. History has proven time and time again that market meddling by central banks leads to massive market distortions and eventual crises. As a society, we have not learned the lessons that we were supposed to learn from 1999 and 2008, therefore we are doomed to repeat them.-Jesse Colombo, Forbes

Read Jesse Colombo’s entire Forbes article here and consider preparing yourself and your family from the inevitable crisis. If you are unsure of where to begin, a book titled The Prepper’s Blueprint is a very good place to start.  Also, consider paying off any and all debts you possibly can to shield yourself from repossessions during a market collapse.

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    1. Kevin2

      Decades ago the inherent self correcting nature of “supply and demand” gave way to Keynesian economic theory with significant governmental / banking intervention in the supply and net worth of money. It appears to me, observant but uneducated, that these interventions require increasing subsequent interventions in magnitude, frequency and duration. Chasing the dynamic makes it more dynamic.

      • TharSheBlows

        Car loan bubble, student loan bubble, national debt bubble, defense budget bubble, etc. Then POP Goes the Wessle. Like Jack in the Box springity sprung.

        Get your PM’s on the cheap right now. Ground, Gold, Grub, Guns and Guts. Your only safe harbor when SHTF.

        • Kevin2

          Gold is interesting in that Uncle Sam can get jealous and deem it unlawful to use / possess. Its been done before. Sure, you can potentially buy a side of beef from a farmer but your grocery store won’t touch it. You can buy a used car but the owner of that car that received payment can’t pay his overdue mortgage with it. Maybe your Dentist may take it in payment but he can’t buy what he wants with it. No Mercedes or BMD dealer will take the money.

          • kovran

            Hydrocarbons began to not actually sell, but to change to gold. Since the price of gold is set by 5 banks and is understated relative to the dollar, and the price of oil is overstated in the market, this has become a very profitable transaction. But the main essence of keeping state savings in gold is safe. The total cost of the entire gold reserve of the planet does not exceed 5.25 trillion dollars. At the same time, the aggregate money supply, or the total amount of money on the planet, is 71.5 trillion dollars. The scale of the coming changes is such that no one today can imagine them in any clear way, let alone describe them in tables and graphs.

          • TharSheBlows

            Kevin2, When I say Gold I also say Silver. There will be many exchanges open and take gold in for exchange for the medium of currency wether it is dollars or pesos, Smart people will open such an exchange. Sure the dope working the cash register at a grocery store is clueless, but the Manager store owner may gladly take the trade. Look beyond a simple trade. There will be triangles of trade, just like Russia and China, Oil for Yuan for gold. Its usually the people that say you can’t eat Gold are the ones who have no gold. Low IQ.

            Lets put it this way, Gold and Silver are a hedge on deflating currency values. Gold has a set value, its the currencies that go up and down. 1 OZ of Silver in Venezuela today can buy 6 months of Groceries. Think about that, and wrap your head around that one. Hunger is a B!tch.. Got to have it your preps..

        • durangokidd

          “Move West young man, move West.” It was good advice then and it’s good advice now. Don’t buy PM’s, generate them.

          Buy a gold cube with both the high banker and trommel set up for less than $1500; a good metal detector for less than $1,000, and miscellaneous equipment like classifiers, shovels, picks, and pinpointer for another $500 and you will have all the income you need to pay the dentist, mechanic, and the farmer down the street: who may need to pay the dentist and mechanic too. 🙂

          • repr sleepr

            I’ll pass DK. Don’t wanna leave my bleached bones in some gulch out there.

            • durangokidd

              Life anywhere in the wilderness is not for the faint of heart. But you don’t have to wander the desert gulches to find gold. I am at elevation right now for the summer and this town was founded along the streams that run through the town because gold was found here, historically. It is still found here.

              The town has every convenience you can imagine, except a pro sports team. Even getting the gold is convenient. While a guy with a metal detector found a 7 ounce nugget a few years back …. within the town limits …. it is not unusual for guys to hit the creeks for a couple hours after work every day. On the weekends the creeks are busy, especially after the monsoon rains that wash new gold down the mountains.

              The gold comes in all sizes but there is an UNUSUAL amount of fine gold to be found in the creeks. With the right technology …. and small mining technology has advanced considerably in the past five to ten years …. it is easy enough to generate paying quantities …. and pay for that technology.

              I was in a prospecting shop yesterday when a guy came in to sell his free placer gold found on some club claims. He had three ounces of fine gold, sold it for 75% of spot …. for cash.

              Gotta love King Dollar !!! 🙂

            • TharSheBlows

              When you break down Durango kiddy’s prospecting fantasy, he makes about 1 cent per hour, if even that. How long will it take DK just to break even on his equipment he had to buy? Yeah and the buzzards above circling jut waiting for him to make one mistake. Like trip and fall, break an ankle and in come the buzzards.

              • durangokidd

                HA-HA-HA !!! LMFAO !!! 🙂

                I have extra time on my hands so I thought I would see what the excitement was all about. My equipment is in storage for the summer so rather than drive down and get it, I bought a 5-gallon bucket w/lid for $4, a plastic garden scoop at Wally World for a dollar, and a couple of classifiers for about $20 each. I keep a metal detector, shovel, rock pick and gold pan in my 4×4 just for fun. So I spent less than $50 out of pocket.

                I spent 5 hours in the creek and produced a quarter ounce of fine gold by hand, the old fashioned way. At $1200 an ounce I produced $400 …. tax free. I won’t sell it until after SHTF and the price skyrockets.

                $400 equates to $80.00 an hour before out of pocket costs for the bucket and classifiers. Sunday I’ll make the run south to pick up my equipment. There is two months of the season left here so I will set up my gold cube & trommel and run some serious material through it.

                You can buy your PM’s if you want. I’ll produce mine, thank you very much. 🙂

                • durangokidd

                  $300; $60 an hour. Sorry, my bad.

                  Still that ain’t bad. There are a lot of people here who would LOVE to make $60 an hour: even you …. to make up for your stock market losses as a Trader. Of course the only gold in Florida is offshore in those sunken Spanish Galleons, so yeah, you better buy your PM’s. 🙂

    2. JRS

      I wonder if the Federal Reserve policy of raising rates now at a time when there is so much worldwide dollar denominated debt is a deliberate ploy to acquire resources from indebted countries.

      I mean, just look at all the countries around the world that are in big trouble right now because the dollar is so strong and they are on the verge of default on their dollar denominated loans.

      I wouldn’t put it past the bosses to come up with a plan to get scarce resources and lock them up by buying for pennies on the dollar through default liquidation. It’s what they do. Economic warfare.

      • rrrr

        We read everywhere writings by people who should know better that central bank policy is determined by experts who just keep on making stupid mistakes. But that is not real. What’s real is that they are not stupid and that the results they produce are intentional. Destruction is the name of their game: Destruction of nations, destruction of the middle classes in many nations. You can see this clearly if you just look.

    3. NorseMan

      The time to make your last run to Walmart is when interest rates rise even though the Fed takes no action. That rise will signal an end to confidence in the dollar and the unpayable debt.

    4. TharSheBlows

      When you can print as phony play money as you like, based on nothing, and then told at the point of a gun to use it or else you die.

      That is US Central Bankers game plan and US Foreign Policy. Its a disgusting sham.

      • B from CA

        “The Wealth Of Nations”

        By: Adam Smith

        Book written in 1776 is the basis of modern economics.

        But TharSheBlows pretty much rapped up a doctorate thesis in economics and foreign policy. Read it and save a load of cash on your edukachon.


      • Old Guy

        But they don’t print very much play money. ITs 99% digital they just add a zero ahead of the decimal point on a spread sheet. If you have the paper play money. All of the government agencys still have to accept it for payment of taxes.

        • JayJay

          And, that is the intent. One ‘wrong’ button pushed and all is ‘deleded’….remember the brit that lost billions at a bank??

          Where’s your money??:-)

      • the blame-e

        Of course it’s a sham. The whole thing is a sham.

        It’s all part of the plan. Something is (not will), going to happen. The value of the USD will fall to zero, and that will be all central banks need to go to cashless world. After all, they will say, nobody but criminals carry cash (and rogue criminal states like Russia, China, and Iran).

        So, special drawing rights (SDRs) will replace cash. It will be interesting to see who gets these SDRs.

        And what will the criminals do — the restaurant workers and those who depend on tips to survive, and the employers. And the true criminals, the restaurant owners, who passed on paying their workers a living wage; how will they respond to no more off the books crap? And how will Russia and China respond to SDRs?

        I can just hear the IRS super computers revving-up now.

      • durangokidd

        The dollar is a TOOL. Debt is an INSTRUMENT. Learn how to use them like any other tool or machine or apparatus or instrument and you too can become prosperous.

        Only the ignorant and trolls rant against the dollar. It may not buy you happiness but you will have a great time spending it in that quest !!! 🙂

    5. the blame-e

      So there’s another crash. Bid deal. [sarcasm]

      The FED and the Treasury will just start yammering about martial law and rioting in the streets if they and the TBTF banks aren’t bailed out (again), and “POOF” no more crisis.

      Another crash has been priced in (to the fully-rigged, manipulated, and controlled everything). [Yawn]

    6. Mr West

      When the stock market crashes, people will look upon the ruins around them and say, I cannot believe I put my money into something so small…

    7. jkru55

      The last crash 2007 happened under Bush(Republican) and was handed to Obama (deer in headlights). The machinations of recovery were already in the works before hand. Hardly a “leftist” plan. Don’t turn your website into fake news

    8. jkru55

      The last crash 2007 happened under Bush(Republican) and was handed to Obama (deer in headlights). The machinations of recovery were already in the works before hand. Hardly a “leftist” plan. Don’t turn your website into fake news

    9. Plan twice, prep once

      The price of silver due to gains in the dollar, thanks to Trump hardball negotiations, are at an all time low. For people with extra cash, it may be a good buy.

      For preppers of limited resources, a roll of 99.99% silver coins stashed away to the end, could be what is needed to bribe passage from a border guard.

      A repeat story many will remember. I talked to my financial manager about precious metals. I said, I had put enough away in gold to pay my taxes for a year. He said he’d never thought of it in those terms. He thought for a moment and he suggested I increase my holding on the next dip to two years worth of taxes. He has a hidden prepper streak.

      The next bubble will be bonds. With the FED increasing rates to stop the Trump economy, the one thing I am sure of is repeated increases in interest rates will cause a bond market crash. STAY AWAY FROM BONDS. Approaching the Great Depression, financial advisors told the elderly to buy bonds for financial security, they got raped, worst advise ever.

      If you have a 401K or market investments, solid stocks in companies with little to no debt that have solid earnings numbers in businesses that provide the necessities of life, national defense, or business are best. Avoid mutual funds, when markets are near their tops.

      Markets…. Trump caused a bump in the markets, but for the last year they have been relatively flat. We keep flirting around 26,000 DOW for almost a year. If the market catches up with inflation and employment data, 30,000 is not unobtanium. If we hit 30K, be damn ready to sell.

      I believe the FED and international banks want to crash the Trump dollar. Trump may be out maneuvering them. It’s a crap shoot. Pick your risk level and stay Frosty.

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