US Economy: Doomsday poll: still a 98% risk of 2014 stock crash - by Paul B. Farrell

Remember the dark warnings from last January through the fall? Fed even saw an “unsustainable bubble” ... Bill Gross: “Credit Supernova” ... Jeffrey Gundlach: “Kaboom Ahead” ... Charlie Ellis: “Don’t own bonds” ... Gary Shilling: “Shocker” ... Nouriel Roubini: “Prepare for perfect storm” ... Peter Schiff “doubling down” on his “doomsday” prediction ... InvestmentNews’s warning to 90,000 advisers: “Tick, tick ... boom!” 

Then a sudden, dramatic psychological twist: The investors’ collective brain tired of the negativity in mid-October after the last bearish headline: “America’s economic guillotine dead ahead.” A week later the reversal: “2014 ‘Year of the Boom’ bet on the bulls,” quoting Bank of America’s chief strategist: “Bulls roaring. Hot race to the New Year. Then beyond into a booming, bullish 2014 rally ... Great Gatsby’s spirit is back in America. Top billing. Let the good times roll. Come join the party.” 

By November irrational exuberance was accelerating, in full holiday mode: Headline, “Shiller’s hot P/Es powering a ‘Roaring Bull’ till 2017,” dubbed the 2014 “Katy Perry market.” A week later, another headline added: “10 reasons to be a bull in 2014.”

Is all this “Great Gatsby” and “Katy Perry Roaring Bull” just hype? Distractions? An emotional “Christmas Rally?” ... a brief dose of “irrational exuberance?” ... and after New Year’s parties, when Wall Street cashes bonuses ... when the next debt-limit fight triggers ... when Yellen’s Fed stops printing cheap money ... when the 2014 political battles really heat up ... when we wake up with New Year’s hangovers, remember all the earlier warnings from Gross and the bears ... will a bear recession take down the markets? After all, this bull market is in the fifth year of an average four-year bull.  

the Fed’s “Ponzi Finance” must run its printing presses full blast to pump more and more credit into the economy “just to cover increasingly burdensome interest payments, with accelerating inflation the end result.”

The problem is huge: Bernanke’s Ponzi Finance is self-sabotaging. Endless cheap money upsets the balance between credit expansion and real economic growth, resulting in diminishing returns: “Each additional dollar of credit seems to create less and less heat. In the 1980s, it took four dollars of new credit to generate $1 of real GDP. Over the last decade, it has taken $10, and since 2006, $20 to produce the same result.” Bad news. 

Yes, Wall Street and central banks worldwide are the engine driving Bernanke’s Ponzi scheme straight into a Credit Supernova bubble. Why? Because in the past generation more and more of the Fed’s new credit was channeled into market speculation, distorting the balance between markets and the real economy. 

“Investment banking, which only a decade ago promoted small-business development and transition to public markets, now is dominated by leveraged speculation and the Ponzi Finance.” 

Gross warns: As a result, “our credit-based financial markets and the economy it supports are levered, fragile and increasingly entropic — it is running out of energy and time. When does money run out of time? 

The countdown begins when investable assets pose too much risk for too little return; when lenders desert credit markets for other alternatives such as cash or real assets,” a trend that’s already accelerating as more and more investors wise up to Wall Street’s dangerous Ponzi Finance, anticipating that a Credit Supernova will soon bring down Bernanke’s totally mismanaged monetary system, probably in 2013, months before his scheduled retirement.

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