Inflationary expectations and wage growth remain low and the Fed has plenty of tools to tame it (interest rates, a huge balance sheet), so the question really is now: where is the inflation going to come from?
If it really is the case that 30+ million Americans can be out of a job and the stock market reaction is to continue climbing on the assumption that the fed will continue to grow the balance sheet, doesn't that point to a fundamental decoupling between the value of the currency and real-world value? I mean are we really going to live in a society where the government pays companies so that their stock price can remain stable, even when demand for their products no longer exists because their customers are all out of work? It seems like a paper economy which essentially only serves to bail out investors.
I'm not sure what the catalyst would be for that kind of a system to come crashing down, but I just don't understand how it could be sustainable.
Unfortunately media has everyone misdirected to worry about guns/race instead of demanding the government serve the people instead of corporations.
It’s possible that the scale of the current corporate welfare program + health pandemic + inaccessible healthcare + unemployment leads to faster and larger response from the plebes.
The revolution, as they say, will not be televised.
To the last sentence, yes, a totally blatant wealth transfer scheme. Anecdotally, I think many of those suddenly "engaging" are just playing into the game - getting their dopamine and ego fix by showing dumb gains on nominal investments thinking that they too are wealthy and smarter than the next one :/
Of greater long term concern though is the decreasing transparency into which companies are benefiting disproportionately from government intervention.
These fed manipulations will lead to an even more dysfunctional marketplace down the road because once the water is tainted - we don't know how much, where, or with what exactly. It's impossible to go back to safe and clean drinking water again from this source.
Historically, the real value of the "stock market" has been that of a place for informed decisions based on consistent measurement and analysis of commonly reported variables regarding the well being of corporations. There's a reason a public company must abide by certain rules and regulations to go and remain public...it's so that investors can expect a certain amount of disclosure to actually make decisions on whether or not to invest. While public disclosure requirements have not changed lately (to my knowledge) - there is no way for the feds bailout factors to be decoupled from earnings.
I would argue that aspect, which represents a huge value proposition of the "stock market" to investors of all sizes near and far, is quickly disappearing. I'm not sure what this means for the future.
The wealthiest already have huge amounts of money saved and invested in the markets. Adding to the money supply primarily benefits those who already have the most money. So something like 80% of new money winds up in the hands of the top 1%, who save it, consume no extra (aside from stocks), and have no impact on the basket of goods.
I think this also partly explains the high P/E ratios we’ve seen over the past decade+.
Nothing in economics is that simple. But this feels reasonable to me. Anything I’m missing?
If you believe economic fundamentals support historically-high valuations, I think it does deserve an explanation.
Forward P/E at highest levels in 18 years: https://markets.businessinsider.com/news/stocks/stock-market...
It is another one of those cases of Goodharts law. The way they are measuring inflation is no longer capturing the drop in the value of money.
But for the later, it will come from the reduced value of the dollar. Which (for more than a decade) has been muted by the reserve currency status of the USD.
That may not be for awhile, but the more debt the government takes on the more likely it is to happen. (The US government can literally print money to pay debt, but that devalues the dollar, aka inflation.)
How long will the USA be the most trusted economy?
