In what may be some of the best, and most lucid, writing on everyone’s favorite topic, namely “what happens next” in the evolution of the financial system, Deutsche Bank’s Dominic Konstam, takes a look at the current dead-end monetary situation, and concludes that in order for the system to transition from the current state of financial repression, which has made a mockery of all asset values due to central bank intervention, to a semi-credible system driven by fiscal stimulus, there will have to be a crash, one which jolts policymakers out of their stupor that all is well simply because stocks are at all time highs.
And since a legitimate fiscal stimulus is what is needed to re-ignite the economy, US and global GDP will continue declining, even as stocks keep rising to new all time highs, not on fundamentals (which are all pointing in the opposite direction), but due to even more central bank intervention and financial repression, thus a Catch 22, which ultimately – according to DB – ends in the only possible way: with a major crash.