When Will The Monetary Heroin Run Out?

Just this week, various media reports celebrated the fact that the United States has now had the longest running bull market in stock market history.

However, there is some disagreement as to when this bull market specifically started. Some date it back at the end of March 2009, others say it started a bit later and that we still have a few years to go yet until we officially cross the mark for the longest bull market.

Regardless of when it officially might have started, a growing number of financial experts are expressing concern for a potential reversal that might be soon coming down the road.

There are a variety of analysts who are now saying that we could see a correction either later this year or sometime next year. And their concerns now echo that of a very small pool of financial experts, those who are dedicated to sound monetary policy, who have been warning about such a devastating correction to come for years now.

The bubble cannot go on forever, though there are some who surely would like it to. And though you might be worried about the sound of a 'correction', what is more worrisome is that the same monetary heroin policies might continue for many more decades, prolonging the reversal, and making the problem even worse.

Financial experts such as investment advisor Mike Maloney, author who wrote the Guide to Investing in Gold and Silver, suggests that there are several things to look for to determine if things are in fact going south. Maloney notes that these are signs such as revolving consumer credit, corporate debt to US GDP, credit card off rates, and more. These, Maloney suggests, are signs of a vicious recession to come ahead.

As for whether or not you'll be able to rely on mainstream media to notify you of exactly when that pullback might start, it isn't going to be as straightforward. As Maloney has pointed out many times in the past, an official “recession” isn't declared until there are at least 2 consecutive quarters of economic contraction in the market, so by the time they declare a recession it is already likely to be well underway.

Whether that correction will be a 20 percent correction, 30, 40+ etc, is anyone's guess. Some have even estimated that it could be higher than 50 percent of a correction. A notable market correction by definition is said to be roughly 10 percent or more. According to American businessman and investor Jim Rogers, he believes that this could be the worst correction that we will see in our lives.

The economy might look strong on the surface but when you take a closer look you might see bubbles everywhere and it's hard to determine when exactly those will pop. This market that we have today is arguably so far removed from a true free market that we can easily expect it to be highly distorted and unrealistic—things might be slightly overpriced.

If we do see that correction, will there be a true stop to the easy flow of credit that's been enabling so many to live above their means for so long? Including the government which has amassed trillions of dollars in debt and even further in liabilities. Or will it be more of the same? Hopefully when that time comes, there will be voices calling for a restoration of sense to the market which doesn't include the same tired tricks that the Federal Reserve has resorted to in the past in an effort to try and remedy concerns.

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