Correlation is not necessarily causation, but sometimes it almost certainly is!

If we pioneering crypto investors consider ourselves to be a head of the curve, this is the curve we are ahead of thanks to Gundlach, a well known bond investor and head of the DoubleLine fund.

How I read this chart

• 2008-9 recession is clearly visible in the MCSI chart line. Wow, What a fall! That was a 50% retracement.
• I notice that the central banks of the world do work together looking at this chart. They all cranked the money making machines to overdrive in tandem.
• Jeff has shown it nicely here. We can clearly see that the aggregate amount of stimulus took on a new trend line upwards.
• 2014-15 as markets looked healthy and pumped and they were about to make new highs (tip to TA, resistance at previous highs guys), central banks thought their work done and let of the throttle a bit.
• Immediately, markets began to tank.
• They pressed now on the pedal harder than ever. The trend line turns up again to form a new sharper upswing trend line.
• Interestingly the US Fed started to pull back. I think this may correlate with the start of raising of interest rates (remember fractional reserve banking), but the ECB and BOJ really took the batton and ran hard! So much for independent central banks! I think we can all agree now they work closely together under the BIS
• In early 2018 we see a very compelling correlation: The ECB took its foot of the pedal and the BOJ and BOE began to coast. With the US in contracting money supply, the enter complex began to correct.
• The reaction of markets was immediate! down!
• Interesting how sensitive markets are to jawboning (talk without commensurate action) I recall this period of financial history as peppered with many pronouncements by central bankers around the world that they will do "what ever it takes" which was perceived as a big fat put on the market.
• This kept up the impression of stimulus without actually doing any. The global economy was running on thin air, not solid ground
• Now we see it was all talk. The put was all bluster and no bang.

My 2 cents

The run up to the 2008-9 was a more "naturally aspirated" economic cycle. There was a lot of money sloshing around and the internet was really showing its economic potential. But a lot of dark corners of the global economy had developed some nasty bubbles (e.g. so called subprime credit growth)

When this finally burst, the mistake that has led to the madness of this chart truly started. The global economy was not permitted to have its clean out. Mal investment was not allowed to be die in true free market fashion. Welcome to the zombie economy. Looks like a healthy economy, walks and talks like one as well. But there is something wrong. A wiff of corruption. To those looking closely, some odd correlations in the macro trends started to decorrelate. Those that dug deeper found new correlations, such as this chart. Financial TV talking heads were now exposed as being shills and not reporters. The lumbering beast of the world economy hobbled along with lackluster GDP growth for an entire decade.

And this money! this stimulus! Where did it all go?

Well the main street economy got some dribs and drabs of it (trickle down economics debunked!), but the bulk went to financial assets and housing. Both of which have rapidly grown to outsized proportions, all resting on poor, some would say fake underpinnings.

These edifices of capitalism are now lurching menacingly.

The big question!

• Will central banks try to push this another time. Print up and push down (money supply and interest rates)?
• Anyone who has a cursory knowledge of history will suspect that money printing cannot go on forever. Its like Heroin, keep on upping the dose till you die.
• Or, will they finally let our economy correct itself?
• If so, then this correction will be a doozy!
• Or for the tin foil hat wearing crowd (mine is always hear at hand) is this somehow a convenient confluence of events which will be exploited to centralise political power? and bring it more in line with the already significantly concentrated economic power in the world?