The OP Robert Paulson is right.
The banking system has always been a ticking timebomb ever since 1970 when Nixon took the lid off that silly idea of "limited supply" in order to pay for the Vietnam war.
When people say that "Bitcoin is inflationary" I don't think they quite understand what they're talking about. Bitcoin's monetary base (as distinct from retail price inflation) currently inflates at around 10% per year, dropping to 3% in 2020 and less than 2% by 2025.
The beloved dollar, on the other hand, has gone from a monetary base of around $850 billion to $2800 billion in the space of 5 years. Thats more than a 300% expansion of the monetary base. If you don't think that is a recipe for some major economic upheaval in its own right then you don't understand money.
The only reason this isn't causing rampant hyperinflation right now is that the world financial system has become so highly centralised over the last 30 years that central banks have managed to hang onto just enough control of markets to prevent the natural arithmetical devaluation of fiat currencies. This would have happened in any free market simply due to the numbers alone. Take a look at
http://coinmarketcap.com for example and imagine if Peercoin's coin supply went from 21million to 80 million overnight. It would get dumped faster than a hot brick.
One of the ways the Fed has done this for example is to suck all the new money back onto their own balance sheet by offering a higher rate of interest on excess reserves. The other place all that new money has gone is into the stock market - chased in their by rock bottom interest rates which has turned cash deposits into a hot potato that nobody wants.
So, far from reflecting an underlying level of corporate growth, the stock market is now simply serving as a holding pen for all the excess cash from QE.
Add to that the fact that this new money has come at a huge price. Due to the nature of our fractional reserve lending system, it can only be created by creating an equivalent amount of debt.
The bottom line is this: The banking system (and several sovereigns) are loaded with so much debt that the major Western economies + Japan CANNOT AFFORD AT ANY COST TO ENTER INTO A DEFLATIONARY TREND. The reason they can't is because that would herald the onset of defaults caused by debt to GDP ratios going beyond manageable levels and markets sending bond yields sky high due to loss of confidence.
So the OP is well reasonable in suggesting that we're headed for major turmoil. There are simply too many stretched central banking "tricks" that are now reaching the end of the line.
Another way to look at it is this: Regarding the 2008 banking crisis - it was never solved. The debt did not get extinguished, it just got hung on a different coat hook. There are 3 coat hooks:
[1] - private sector over leverage (where it all started)
[2] - sovereign balance sheets (i.e. taxpayers on hook)
[3] - central bank monetisation (Weimar wheelbarrow land)
In Japan and the US, we've reached stage 3 who's effects are currently being mitigated by attempts to stop markets from appropriately revaluing currencies according to today's money supply (an outcome which will not last). In Europe and the UK, we're at stage 2 about to go to stage 3.
The current stock market dip is being caused by 2 things:
[1] - the "threat" of QE wind down (the pump that blows up the Stock Market balloon)
[2] - Draghi's press conference 2 weeks ago which basically amounted to the ECB announcing that they were throwing in the towel on European growth.
That Draghi press conference represented the end of a 2 year phase of optimism kicked off by his 2012 "ECB will do everything it needs to to save the Euro" speech which saved the Mediterranean bond yields from blowing the eurozone apart. The compromise was that Eurozone growth would rescue the situation once it appeared over the next 2 years.
Well, it hasn't appeared.
In fact, European deflation is now on the cards due to lack of transmission of ECB monetary policy into the commercial banking sector so this sets a whole knew scene and Draghi's 2012 bluff has been called - successfully it turns out because he's now stepped back from the precipice of full Eurozone QE and gone for a limp program of "Covered Bond Buying" (under massive pressure from Germany I'm sure who happen to be owed a tidy half trillion Euros by the rest of the Eurozone due to Target2 imbalances plus they're not too fond of wheelbarrow-based economic policies).
The numbers involved in all of this are colossal. I don't know if people quite realise it - never mind the derivatives exposure that's all stacked on top of it.
Contrary to the nonsense being posted challenging the OP, things definitely are lining up for a perfect storm - either in the next few months or couple of years. Who knows how long they can keep the plates spinning, but at some point one of them is going to be dropped and there aint no soft landing available on this side of the financial horizon.
