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The Mother of All Corrections, Inside the Chinese Black Box, and More... - Views on News from Equitymaster

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The Equitymaster Research Digest

The Mother of All Corrections, Inside the Chinese Black Box, and More...
Jan 15, 2016

Predictions about US stocks being in a bear hug and headed significantly lower are dime a dozen these days. But the most sensational by far has come from Society Generale economist Albert Edwards.

Edwards is of the view that, should the US economy plunge into a recession, its stock markets could fall by as much as 75%.

Yes, you read correctly: Nearly three-fourths of the stock market wealth is in danger of being wiped out in quick time.

Edwards, of course, isn't being sensational for the sake of it. His argument is that the policies of the US Fed and its international counterparts are now coming back to haunt them, which could lead to a deflationary spiral and a US recession. And since the central banks have used up all of their ammunition, they won't be in a position to prop up stocks again.

What happened to the trillions of dollars pumped into US economy via unprecedented programs like Quantitative Easing?

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