Egon von Greyerz, January 24, 2016

The downturn in global markets is now having a major impact on confidence, as fear is coming back into the European economy. This trend is going to accelerate and I would be surprised if the ECB waits until March to launch another stimulus package. It’s absolutely amazing to think of how totally out of synch these central banks are.

But what the Fed did is even stronger proof that central banks don’t know what is happening. The timing of the rate hike could not have been worse. They should have increased rates 2 – 3 years ago in order to choke off the spectacular bonanza in asset markets. Instead, the Fed waited until the economy turned down to increase rates.

But as I said in December, right after the Fed raised rates, there won’t be any further increases in coming months. Instead, there will be a rate reduction very soon, accompanied by QE, and the Fed is likely to join the ECB with negative rates in coming months.

So we will see the ECB and the Fed join the central banks of Japan and China with massive money printing programs. The Bank of England and the IMF will also join in, and during 2016 we are likely to see the biggest money printing program in history. Remember that global debt has gone up 10-times since the early 1990s to $230 trillion. The QE that we will see in 2016 and beyond will be at least of that magnitude and probably even higher as the $1.5 quadrillion derivatives bubble bursts.

The problem is that this time the QE won’t have any lasting effect. To pile a few hundred trillion dollars of debt onto a world that can neither finance nor repay the existing debt can only exacerbate the inevitable implosion. But before that the world will experience the most incredible hyperinflation. This will of course have nothing to do with demand for goods and services, but only with collapsing currencies.