Central Bank Nastiness, Japan Swoons, Nikkei Down 6.4% Last Night

Nikkei 6-13-2013

There is a chill moving through markets right now. The great central bank experiment of the last 5 years (the acute version) is misfiring again. As they say—you can’t get something for nothing, and the experiment which has failed the lower and middle classes of the Western world is now failing the monied classes. At least at this moment and in Japan. The markets which were feeling pretty good about themselves (for the most part, though Japan has had significant volatility recently) aren’t feeling so good.

The world is coming to terms with the possible end of QE, and like a heroin addict whose methadone prescription may soon run out, markets are getting very nervous.

This is no prediction of collapse by any means, the economic band aids have held longer than I thought possible. (Analogy number 2, sorry.) But they are just band aids, or perhaps more accurately duct tape. Band aids help wounds heal, duct tape just keeps things held together ad hoc. But the adhesive, whether band aid or duct tape, always fails if there is enough pressure behind the structural failure. It’s been building for a long time.

Time to be on one’s toes, if one isn’t already.

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