by Rick Ackerman
Traders sent global markets into wild spasms Thursday on news of further monetary easing by the European Central Bank. With rates already negative and no eurozone inflation in sight, who could possibly believe this is going to end well? Far from stimulating spending and investment, increasingly desperate policy measures by Draghi & Co. are achieving the opposite, creating a climate of fear and uncertainty for lenders, borrowers and households. The only reason easing still works at all in the U.S. is that, unlike their European counterparts, American consumers are hard-wired to spend every dime they can get their hands on. Even so, this won’t suffice to prevent the tottering economies of China and Europe from imploding. Nor can the U.S. economy remain even weakly buoyant as the rest of the world sinks into a bog of deflation. Under the circumstances, an investor would have to be out of his mind to buy stocks at these levels on expectations of a rally to significant new highs. What rallies we’ve seen lately are driven almost entirely by short-covering. Be ready for a 5000-point drop in the Dow, just for starters, after the last bear throws in the towel.