Fed stimulus has created the “Cobra Effect.

Fed Stimulus Creates The Cobra Effect Our colleague, Jeffrey Marcus, penned a great piece this week for our RIAPro subscribers (Try Risk-Free for 30-days) discussing how Fed stimulus has created the “Cobra Effect.” The term relates to an old story from Dehli, India. https://www.zerohedge.com/s3/files/inline-images/Cobra-Effect.png?itok=eljDy9fh “As the story goes, there was once so many cobras in Delhi was a bounty placed on each dead one delivered to the government. At first, it worked. But then, entrepreneurs began breeding cobras to garner more income from the bounties. When the authorities figured out the scam, they canceled the program. The problem came when the breeders, who had a large inventory of cobras, released them into the wild. With the demand (the bounty) for the snakes removed, the cobra population exploded worse than before.” As Jeff goes on to discuss, the actions taken currently though Fed stimulus to sustain the economy, and buoy the stock and bond markets, will eventually cause a bigger problem. The flood of liquidity is hitting a highly illiquid market that has now detached the market from the underlying economy. ANOTHER COBRA EFFECT KILLED TENS OF MILLIONS IN CHINA What happened in China is worth mentioning. The “Four Pests” campaign was introduced by Mao Zedong in China in 1958, to eradicate pests which were responsible for the transmission of pestilence and disease: mosquitoes, rodents, flies and sparrows. Th... Read more at: https://www.deccanherald.com/opinion/in-perspective/delhi-beware-of-the-cobra-effect-762366.html#:~:text=The%20'Cobra%20Effect'%20recalls%20an,catchers%20to%20receive%20the%20bounty.