Look to the stock market and you’d assume Wall Street was doing just fine. The S&P 500 has come back to March highs, the Dow is back to positive for 2018, and the Nasdaq is at fresh records.
It’s all built on shaky foundations, said longtime market bear and former Republican Congressman Ron Paul.
This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told.
“I see trouble ahead, and it originates with too much debt, too much spending,” Paul said.
This isn’t the first time Paul has made such dire warnings. During a “Futures Now” appearance in August 2017, he predicted a 50 percent drop in the market, a call he has doubled down on a number of times since. Since that appearance, the S&P 500 has rallied 15 percent.
Paul belongs to the Libertarian Party, a faction that emphasizes constrained government spending. He sees federal spending and monetary policy as dual forces inflating a market bubble.
“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.
Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.
To Paul the decision-making arm of the Fed is equally at fault in creating a market bubble.
“The Fed will keep inflating, and that distorts things,” Paul continued. “Now they’re trying to unwind their balance sheet. I don’t think they’re going to get real far on that.”
The Fed is more than two years into its rate-hiking cycle. In conjunction with rate hikes, the Fed is also unloading assets from its balance sheet, which expanded to $4.5 trillion during its post-financial crisis quantitative-easing program.
Paul is not confident much will change to divert from the disaster he predicts, he call on Thursday for a potential 50 percent sell-off on the stock market.
Source: CNBC
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