Author Topic: The End Game  (Read 1631 times)

Cyaphas

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The End Game
« on: June 20, 2016, 06:26:51 PM »
With Central banks keeping interest rates so low for so long, in some cases negatives; what happens when the economies take a big hit again (Energy Debt Bankruptcies) and they don't have any interest rates to drop to stimulate the economy? Print? 

AlmstRtrd

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Re: The End Game
« Reply #1 on: June 20, 2016, 08:25:36 PM »
With Central banks keeping interest rates so low for so long, in some cases negatives; what happens when the economies take a big hit again (Energy Debt Bankruptcies) and they don't have any interest rates to drop to stimulate the economy? Print?

Well, rates can go even further into negative territory. Swiss bonds are now negative out to 30 years. Central banks have already printed like crazy but it's only stimulated growth ever so slightly. Here in The US you can see it in charts that show inflation overlaid with the bouts of quantitative easing. The Fed can't even get inflation up to its goal of 2%. The Fed is out of bullets... or so it seems to me. Yellen just can't say that.

AlmstRtrd

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Re: The End Game
« Reply #2 on: June 21, 2016, 08:38:52 AM »
The question is not only "what if governments cannot stimulate economies?" but also what kind of asset mix is likely to do well during prolonged slow growth/deflation? Is a stock-heavy portfolio still the way to go?

zz_marcello

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Re: The End Game
« Reply #3 on: June 21, 2016, 09:04:01 AM »
There is no End Game. The world is getting more and more wealthy since the beginning of capitalism.

If it would get really bad (new 2008 recession) the EZB / FED could just buy all the federal government debt in a new massive quantitative easing program.
In the long term equities are the safest place to be. This are stocks and real estate in countries with a positive population and economy growth.

Compared to Europa the US is currently a very good place to be. Some Asian countries which still have strong growth, currently have a low stock market valuation
The US stock market currently has a high valuation but compared to the non existing real yield on government bonds the valuations are low.

I own a mixture of US Stocks (Index+ single), Singapore and Hong Kong stock ETF, US REIT Funds and a few single Reits. (plus Lending Club and Limited Partnership investments). Everything is fine. My wealth is safe and in the long term will grow. Dividend flow is strong.

The worst place to keep your net worth long term is cash and government bonds.
Historically government debt holder always got screwed in times of massive debt.
The US or major EU nations will never declare bankruptcy The central banks will just buy their debt. (so screwing cash and debt holders)
« Last Edit: June 21, 2016, 09:07:44 AM by zz_marcello »