"Japanization" or Central Banking Bubble Continuation

SP:SPX   S&P 500 Index
Frustrated by the recovery and growth prospects? There's one very powerful force that may dampen growth for years to come: demographics.

Women and baby boomers entering the American work force helped to supercharge expansions in 1975 and 1983 by filling an increasing number of jobs and purchasing more goods and services.

Baby boomers are starting to retire, and there aren't as many women in the work force. That could take 2 big growth engines out of the economy and curb gains for stocks.


"The wreckage from the latest credit bubble (promises to pay tomorrow what is borrowed today carried to the nth degree leading to infinity) cannot be simply swept aside."


The similarities naturally lead to the question: are we facing a “Japanization” of the U.S.? Pimco’s Mohamed El-Erian believes that we can no longer assume that “Japan could not happen here”. And we should “regret the smug assertions that Japan’s ‘lost decade’ of growth was due to a combination of uniquely Japanese failings”.


3 Reasons This Bubble Will Continue to Grow
"As we’ve been over before, the most important driver behind this rally has been cheap money.

Periods of cheap money policy - low interest rates and sharp increases in money supply - have always resulted in bubbles.

The reason is because cheap money always finds a home. As long as traders can borrow at 0% and buy anything that’s going up and investors are frustrated with less than 1% annual yields in money markets, money will flow to assets classes which offer greater return.

If history is any evidence, the longer the period of cheap money lasts, the longer resulting bubble will last. And, of course, the bigger the eventual price to pay when the party is over."


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