When LEVERAGE FAILS and HOPE turns to FEAR

"In today’s TedBits we will be outlining a lot of smoke signals.  They signal fires burning and about to break out.  As everyone is aware, the Federal Reserve has been tightening monetary policy for almost a year now and has been joined by the Chinese central bank.   The Federal Reserve has been reducing its balance sheet expansion from $85 billion a month (85,000 million) to zero in mid-November.  While the fed does not characterize it as a tightening, it is one.  Numerous studies have put the amount of interest rate reduction to -3 % when QE3 was at full bore.  Now that the reduction is approaching zero negative interest rates are ending, they have raised rates by about 3% in real terms.  We are Austrians at TedBits and believe in all of the core truths from Ludwig Von Mises:

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”
 

- Ludwig von Mises"

at http://www.zerohedge.com/news/2014-09-26/when-leverage-fails-and-hope-turns-fear