Wall Street Headed for a Cliff or is This the 90s on Steroids?

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved." - Ludwig von Mises

At the height of a new boom it has been always said-- this boom would last for eternity, this one boom is different, it will be the utopian boom. Every boom ends. If you saw an economy as patient, the boom would be a tumor, and the bust the attempt to remove it. Eventually too many financial tumors result in the death of the economy.

This is how the centralized economy functions. A tumor here and a tumor there. A bubble in real estate, the bond market, technology, currencies, and of course stocks. The explosion of financial bubbles in the past six years is on a scale never precedent before. Spreading like financial cancer, the financial disease is globally out of control. It seems as if the world of finance has gone absolutely bonkers!

The origin of the boom lies in the interest rate manipulation of central banking, the creation of available cheap liquidity to stimulate artificial growth and malinvestment. To better understand these terms and this process, my job as an observer is to demonstrate the scale, magnitude and functionality of the financial system.

When a central bank manipulates interest rates lower it becomes cheaper to finance debt, and debt markets. Low interest rates allow people to take loans they normally could not afford. Risk cannot be properly assessed in a low interest rate environment. We have wealth flowing into places it normally would not be. This displacement of wealth is called malinvestment. During every artificially created boom tremendous wealth flows into the stock market, because low interest rates allow traders to leverage up to the extreme! A bubble in a stock market always has its origins in a low interest rate environment. Without a rising stock market a central bank cannot create an artificial boom.

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Stock market leverage is at the highest(lowest) level in history; more colossal than the dot.com bubble and the housing boom combined. Particularly in 2013, once the stocks ran past their all time nominal highs, leverage began accelerating off the charts.

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