Thursday, March 17, 2011

Central Banks Unleash The Fury

The chart below shows each 5% correction in the S&P 500 since the market bottomed in March of 2009.

Only once (April of last year) has it led to a larger decline.


Central banks around the world are working around the clock with liquidity injections (money printing) to keep stock prices artificially high.

The Bank of Japan has pumped in tens of trillions ($400 billion!) in Japanese Yen this week to counter the earthquake aftermath.

The Federal Reserve here continues to pump in $4.1 billion every day.

Who will win?

I believe both sides will lose.  Their inflationary injections will continue to battle the deflationary force of the market (think gravity) and the ultimate winner will be the smart money that leaves the fight and moves over into commodities.

Speaking of which, the chart below shows the PPI finished consumer food price index, which rose 3.9% in the month of February alone.  That is an increase of 46.8% per year in food if the trend were to continue.



h/t The Big Picture / Zero Hedge

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