Harvard Trained Economist: FedRes May Need To Print $65 Trillion In The Next Crisis
- Harvard Trained Economist: FedRes May Need To Print $65 Trillion In The Next Crisis
Harry Dent says the Fed may need to print $65 trillion in the next crisis, but they may not be able to get away with it. Here’s why…
by Harry Dent via Economy & Markets
I predicted in 1988 forward that the massive Baby Boom generation would peak in its spending by late 2007. Simply that 46-year lag for peak spending of the average household. That happened on cue and we’ve been living off of accelerating QE and now tax cuts ever since to compensate. So, with such a natural decline in spending, how has the economy even grown as slow as it has (2%)?
Financial Assets vs. GDP
From 1950 through 1990, the ratio of financial assets to GDP stayed in a narrow range between 2.95 and 3.65 times. The highest was around the top of stocks between 1965 and 1972 before the crash of 1973-74 that brought financial assets down to the bottom of that range.
But since the early 1990s, this ratio has ballooned. It peaked at 5.9 times in 2017 and is presently at 5.8. Now for the numbers: a whopping $123.2 trillion.
What’s obvious to me after the greatest bubble in modern history is that this ratio back down to the low end of that more normal historical range and then trade within that range largely or wholly again for decades to come.
This means that about 53% of financial assets, or $65 trillion, will disappear from our economy within about 3 years and mostly not return for a long time, if ever. $89 trillion of those financial assets are households alone…
And then there is the $84 trillion in higher leveraged financial assets in the financial sector. This doesn’t crimp spending as much as it contributes more to the bubble collapse.
How much Fed printing would it take to offset this avalanche? $20 trillion, or ultimately $65 trillion? Think they can get away with that after printing an unprecedented $4 trillion that was not enough?