During this last recession, from which we have never recovered from, there has been an innate ability to do everything opposite what is natural. Recessions are part of the economic cycle and due to politics being politics, trying to please the masses and politicians getting re-elected, there is a forgotten concept that it is natural for an economy to go through a recession in order to grow.
Another way to phrase this is taking a step back in order to take two steps forward
A recession is merely a restructuring process where business’s alleviate themselves of bad debts, bad businesses go under, and good business are allowed to restructure in order to get rid of rotting parts of the system and come out stronger than before.
We have come to this ideology that a recession isn’t part of the normal business cycle and a recession can’t happen even though there has been a recession every 4-6 years; jobs are never supposed to be lost, businesses are never supposed to go bankrupt, everybody should be a winner.
The answer that politicians have brought us is bailing out every company that may have to go to bankruptcy court in order to save jobs and in turn, save votes. Instead of allowing the economy to restructure and get rid of bad investments and bad debt.
Sadly, in the upcoming election we are voting for another two puppets. I will leave it to you to decide whether Obama or Romney is the right choice. I choose to live and invest overseas because they are both bad decisions and choose not to vote for that reason.
There is one thing that we can all agree on, debt is bad.
Very bad in fact for both personal lives and the livelihood of a business; people are allowed to bankrupt, businesses are allowed to go bankrupt, are governments allowed to go bankrupt?
The answer has been to inject more money into the monetary system to keep the economy afloat instead of allowing it to restructure via a recession. This will only makes things worse since the bad debts will continue to get worse until…… the next recession?
QE3 (3rd round of Quantitative Easing) is coming soon and the effect for day traders is actually excellent, in the short term anyway. QE3 is when the government prints money out of thin air to buy more debts. Think of it as getting another credit card to pay off another credit card instead of paying it off. Ben Bernank and his cronies are printing money in order to buy more bad debts, educate yourself:
As I pointed out in my 3 week August recap, we have seen the lowest volume since 2006/2007 and the new round of QE3 will bring us an increase in both volume and volatility.
A huge influx of cash will cause a stir in the market as people will react to exactly what’s going on. My only concern is what happens after the economy doesn’t react to the QE3 stimulus, exactly how the economy didn’t react to the QE1 and QE2 stimulus?
Don’t worry, QE4 will come soon enough.
Day Trading is the only profession that I know of where you can actually make money in a recession in times of turmoil. It is the only career where you can rely on yourself and react to the markets and make your own decisions.
The idea that what is happening in Europe right now will not happen to the United States isn’t farfetched. Over 5 years ago California, the 8th largest economy in the world on its own, was giving government employees I owe you papers instead of paychecks because they couldn’t get their house in order.
What happens when the 8th largest economy in the world can’t pay its bills?
Soon I will be India looking at the opportunity of day trading in the Indian markets and it is no secret that I am actively looking for alternate resources for banking. So QE3 will be great for day traders as well as QE4 which will come after that.
We should have fun while the party is still in session because soon the hangover will arrive and the Euro will be the least of our problems.