What might force an end to money printing?
It’s an important question because that event, whatever it is, will probably trigger a deflationary crash. I don’t mean to suggest that this will be the final crash, or even the main crash, but rather the first big crash we will experience.
I’ve read a lot of smart people and asked a lot of questions but it seems no one knows the answer to this question. Which makes sense because the system is very complex and what will happen is heavily dependent on what the majority of the public believes, and on what politicians do, both of which are unknowable and unpredictable.
Following are some scenarios that seem plausible. In all cases I envision something happening that is too large for central banks to offset with more money printing which then exposes the fact that they are not as powerful as many people think and are forced to curtail printing or risk losing credibility.
- The majority stops believing that growth will restart and a panic selling of assets begins that becomes too large for central banks to put a bid under.
- Bond markets become concerned about inflation and force the interest rate up.
- An external shock, such as a foreign country or bank defaulting, sets off a chain reaction in our interconnected economies.
- War or terrorism disrupts the energy sector of an exporting country.
The best early warning signal for the first three scenarios will be rising interest rates.