As more and more players on the S&P 500 and the Dow Jones Industrial Average up the ante on their year-end-returns predictions, analysts like Sven Henrich, founder and lead market strategist of NorthmanTrader.com, are getting nervous.
In a recent op-ed posted on MarketWatch, Henrich asked:
“Why does the global economy need rescuing after 10 years of non-stop monetary stimulus?”
The answer, he warned, is unsettling. According to Henrich, investors are becoming so afraid of any market “pain” that central banks now feel too much pressure from politicians and their associated governing bodies.
The banks, which were created to help maintain economic stability, now must cater to the concerns of an elected population and its constituents.
“By bailing out markets and economies at every sign of trouble over the past 10 years, central banks have given politicians license to do nothing.” he wrote.
Henrich added, “Nobody even wants to even talk about [solutions]. Why? Because they involve pain. Voters don’t want to hear pain. Hence, all you hear is free money.”
The issue is not localized to the United States, either, although the country certainly could be argued to be leading the charge with some of the rhetoric espoused by more extreme 2020 presidential candidates.
Globally, debt has risen by hundreds of trillions of dollars since 2015, when the New York Times reported it had grown $57 trillion just since the international financial crisis in 2008.
That rising debt creates multiple problems for every country in which it is an issue, which is to say basically every first-world country.
The central banks associated with those countries are losing the flexibility they need to deal with financial crises everyday thanks to an ongoing monetary policy that involves essentially a constant, steady accumulation of more debt via stimulus programs that are not stop-gap in nature but rather permanent economic fixtures.
In the first quarter of 2019 alone, world debt rose by $3 trillion, bringing global debt to $246.5 trillion. The United States alone owes more than $69 trillion, with a government debt equivalent to 101 percent of the GDP.
Many analysts warn that if central banks at home and abroad do not stop issuing debt, the global economic recovery could end up at risk.
“Central banks are now an impediment to progress,” Henrich concluded. “They are not only bailing out markets, but they are extending a license to politicians, a license to do nothing but add more debt.” He added, “And that is the rise of insanity.”