[Marxism] Prelude to a Crash » CounterPunch: Tells the Facts, Names the Names
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Mon Feb 3 13:17:18 MST 2014
Margin Debt Hits All-Time High in December
Prelude to a Crash
by MIKE WHITNEY
The Fed’s easy money policies have pushed margin debt on the New York
Stock Exchange (NYSE) to record levels laying the groundwork for a
severe correction or another violent market crash.
In December, margin debt rose by $21 billion to an all-time high of $445
Buying equities on margin, that is, with loads of borrowed cash, is a
sign of excessive risk taking the likes of which invariably takes place
whenever the Central Bank creates subsidies for speculation by keeping
interest rates pegged below the rate of inflation or by pumping
trillions of dollars into the bloated financial system through misguided
liquidity programs like QE.
Investors have shrugged off dismal earnings reports, abnormally-high
unemployment, flagging demand, droopy incomes, stagnant wages and
swollen P/E ratios and loaded up on stocks confident that the Fed’s
infusions of liquidity will keep prices going higher. It’s only a matter
of time before they see the mistake they’ve made.
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