First, if we really are entering a global bear market worldwide, this must be said up front:

The Fatal Conceit aside, here are my 2 Bitcoins worth of thoughts in the wake of today’s market convulsions:

1) People ought to stop thinking The Federal Reserve can drop manna from the heavens.

The Fed is not G-d. It is a group of very mortal central planners who control the cost of money. Unfortunately now, they control so much more, in an attempt to manipulate the prices of financial assets and prop up whole industries.

We should pray for a world in which people’s lives do not hinge on transcripts of Fed minutes.

2) The Fed has zero incentive to raise rates and extricate itself from financial markets.

It will always find an excuse (turbulence in the markets, tepid growth, political uncertainty) to follow the path of least resistance (in this case keeping the Fed Funds rate at 0% ad infinitum). What political reason could it possibly have to allow interest rates and prices to normalize?

Peter Schiff agrees:

3) It will continue to debauch the currency however.

4) That people put their faith in world economic growth in Communist China was/is asinine.

5) Remember that Thomas Friedman wished we were more like them.

6) He was wrong. Markets trump Communist central planners.

7) And it is not the job of politicians to control prices — up or down — to begin with.

8) Seriously. It doesn’t work and it’s wrong.

9) In fact, the manipulation of prices by the political elite is one of the primary drivers of crises in the first place.

10) But sadly…

11) More sadly…

12) That unpleasantness aside, one thing worth noting is that as in the post-Great Depression, millennial investors are likely going to continue to stay out of the market.

13) But perhaps they shouldn’t if we get a sustained drop.

14) Also worth remembering is that contrary to their portrayal in the press, financial markets are not everything.

15) And our bias towards ever-higher prices is not healthy.

16) Lower prices convey valuable information too.

17) The public will still probably want to burn the evil speculators though.

18) A healthier perspective is to view the market as being on sale when everything tanks.

If you can be a liquidity provider when everyone rushes for the exits, you will not only protect but grow your capital. It is much easier said than done of course.

19) Also worth noting in an era of 1,000 point drops at market open is that there is a recent force in financial markets that is going to amplify volatility. We should get used to it.

20) Ultimately, here is one way out of this mess:

21) But we’ll probably do the exact opposite if this metastasizes into a crisis, which President Obama will NEVER let go to waste.

 

Featured Image Source: YouTube screengrab/Paramount Pictures.