At least, that’s the opinion of former Congressman Ron Paul. During an interview on CNBC last week, the libertarian commentator predicted a huge crash in the financial system, saying the stock market’s “day of reckoning” is near. (Source: CNBC, last accessed June 30, 2015.)
Dr. Paul’s view comes from the enormous stimulus package unleashed by the Federal Reserve. “I am utterly amazed at how the Federal Reserve can play havoc with the market, I look at it as being very unstable.”
Since the Great Recession, the Federal Reserve has adopted extraordinary measures. One of those measures was the massive quantitative easing program. The U.S. money supply has increased more than $5.0 trillion, or 67%, since 2008. Central banks’ asset buying efforts also boosted the stock market and the bond market to extremely elevated levels.
Paul did not nail down a hard date as to when a crash could come, saying it “could be tomorrow, could be a month, could be a couple of years from now.” It all “depends on the psychological acceptance of the system.”
“I don’t think there’s any way to know what the [timeline] is, but after 35 years of a gigantic bull market in bonds, [the Fed] cannot reverse history and they cannot print money forever,” he continued.
When asked if he thought the stock market is overvalued, Paul answered very clearly: “Of course I do.” He did not pick on any particular stock but considered all to be overvalued because the Fed was very efficient at doing so.
As he concluded, “Eventually the markets will rule. […] I run a little bit scared because there will be a day of reckoning.”