Monday, May 6, 2013

The Great Wall of Liquidity

“If you buy stocks now, you have the Federal Reserve, the European Central Bank (ECB), the Bank of Japan, and China’s central bank on your side. They are basically providing an insurance that the markets will not have a big decline. That’s a very good guarantee…until eventually it doesn’t work anymore. But for now, it’s the best guarantee investors could ever hope for….

“Japan announced that it will buy around $78 billion of its own bonds per month. That means the globe is now seeing perhaps $160 billion of fresh money created each month to swamp the financial markets. That’s almost $2 TRILLION per year. It’s a ‘Wall of Liquidity.’

“The ECB just cut interest rates to 0.5%, the lowest ever for them. China is already actively trying to patch over the bad financial problems of its banks. As Europe and China struggle with recessions, or at least weakening economies, their central banks will only become more aggressive.”  [Bert Dohmen, 5/4/13,]

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