(August 2020 Update : The end of QE most definitely wasn't, and apparently still isn't, in sight.)
US Treasury Secretary Steven Mnuchin has just announced that Trump administration policies will raise wages without causing inflation.
This, of course, is impossible unless other variables are modified in the process.
For instance, if less money were printed by the FED, especially via Quantitative Easing.
All the evidence available to the public at this time suggests the existence of a major financial bubble.
We know that the ECB and the FED have printed over U$ 22 trillion in the past 10 years. This money hasn't reached The People (aka the 99%), but the current stock market indexes are a clear indication of where most that cash has gone.
Emerging markets like Brazil, whose main stock index is up over 200% in the past 2 years, apparently was also a favorite destination for Q.E. money.
Another warning sign comes from the fact that bond investors seem to be ignoring the FED's more hawkish tone.
It's as if the markets were going through a mass delusion, where nobody believes that a crash can actually happen.
The masses seem mad and where this leads us has been well studied for over 170 years.
The FED's recent warnings and this latest statement by the Treasury leads us to believe that the Trump admin is in tune with the Central Banks - and they agree that the markets must be drained.
"Higher wages without inflation" probably means they will work to dry up the float. The markets are increasingly volatile during the past few weeks and the Administration apparently has taken the clue.
Unless the FED plans on a radical rate hike (we doubt it), then reducing or ending Quantitative Easing is the other most obvious step to dry up cash from the markets to avoid inflation.
Q.E. has achieved its goal since the exceptional circumstances of the 2008 crash and it's currently being misused to pump emerging markets into unreal valuations.
Mr. Mnuchin's statement is being mocked by some, but we believe there's a deeper meaning to it than most investors realize.
Prepare for a stronger USD soon.