QE ending in Europe despite a weakening economy.
In recent years the ECB balance sheet has ballooned up to an astonishing $5.3 trillion (4.7 tril euros), which is a whopping 40% of European GDP. That's roughly double the US Fed's balance sheet as a percentage of GDP, which is approx $4 trillion or 20% of the US GDP.
When the Fed ended QE in the US they encouraged big deficit spending and tax cuts to make up the difference. Republicans ended the 'sequester' and now annual deficits have ballooned to $1 tril. Then came Trump's tax cuts, and they're even increasing Social Security payments substantially, which is rare. All to stimulate the economy to make up for the lack of QE.
But since the US economy is mainly consumer driven (as opposed to infrastructure or capital equipment driven like China), they'd be better off just giving every US citizen a check for $3000 every year to spend. That would cost $1 tril/year but at least it would get the real economy going.
Rickards said that since QE and ZIRP failed to generate much growth or inflation, they switched instead to fiscal policy (deficit spending, tax cuts).
The QE/ZIRP approach removed the Fed's policy options that they will need to deal with the next recession or financial crisis (ie lowering interest rates and doing QE). Rickards says the Fed is really desperate to normalize since otherwise they're dead meat when the next crisis comes.
Debt debt everywhere. It can't end well, and the corporate debt binge has a mountain of Derivatives piled on top..
