Will the Stock Market really crash?

There are a number of threads in trying to anticipate this event.

1. The Keynesian frame of thinking.
Lord Keyns' formulations were based on the assumption that other factors would stay the same. That is, compliance with govt regulations, labor cost and efficiency,etc. So, if you inject govt spending, it would stimulate the economy, recession could be avoided or made easier at the cost of increased National Debt. The latter would be paid back when the economy was humming. Why isn't it working then?

2. Why isn't the stimulus working?

a) It used to work out that spending of $1 would produce an economic growth of $4.55. This eroded to the point that the return would be dollar for dollar. Recently, the return is negative.

b) One reason is that the National Debt has been allowed to grow and grow. It has to be financed and financing it causes distortions in the flow of capital.

c) Liberals love to regulate. The regulations slow the economy, making it less efficient. Govt workers have unionized and gotten pension plans that are very expensive.

d) The Obama factor. Liberals want to downsize the US. They believe that the US has gotten rich by stealing it from others and that the well-to-do steal it from others. Liberals are working on transferring capital from the rich(who are good at using capital) to the poor(who are not). So, injected capital works less and less. Obama has been allowed to push these policies further than most Socialist (Democrat) Presidents.

e) The man-made global warming fantasy. The Obama regime has a war on fossil fuels and high cost energy is hampering our economy.

3. Balancing on a razor blade.
QE1 and QE2 were gigantic Keynesian stimuli. However, in this case, the capital injection was created by cheapening the US Dollar. What??? you say - the dollar has appreciated in value. Yes, but only because the Euro is self destructing. Besides, the value of the Dollar and gold are being manipulated. This diverts capital into unproductive use. How? The measures used to keep inflation low remove capital from productive use. The FED has a lot of money parked in banks and pays the banks interest. This makes that money a liability and not an asset. A large part of the excess money was spent in making stocks advance.

4. Why are we talking about a crash?
Earnings are beginning to drop. This will be exaggerated by the planned gutting of the military.

5. Will a QE3 prevent the coming crash?
Depends on how big, how it is implemented and whether the FED allows inflation to pick up. Inflation would fuel stock prices and would act as a tax. Depends.