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Economic Collapse Part II



January 27, 2011 – Comments (0)

The economy is roaring back, or so it would appear from much of the economic news being published almost every day. The stock market since the March 2009 low is up almost 100%. People feel better about the economy as the Federal Reserve has pumped trillions of Dollars into the system, inflating asset prices. As people feel richer, they spend more and spending helps the economy. The big question is, can it last?

This is a becoming a major concern for the Federal Reserve. Their massive stimulus is pushing the economy slightly higher but not to the extent that it could last without the stimulus. Housing is still at the dead lows, jobs continue to be scarce and not growing.  The Federal Reserve is stuck between a rock and hard place. If they stop pumping money into the system, the U.S. and possibly the world will fall back into a deep recession and if they continue non stop pumping money, inflation will rip higher. There is no easy answer here and they are in trouble. Do they continue with QE-3, QE-4 and so on? Do they stop pumping the money into the system and have the market fall back down and consumers stop spending?

Talk about a mess and a half. The bottom line is this, as swing traders, we will be playing this market thousands of times in each direction over the next few years.

Gareth Soloway

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