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The reason asset prices rise first in a fed led recovery is because new money enters the system through bank loans. Naturally, banks want to lend against hard
by narrator 11y ago
The reason asset prices rise first in a fed led recovery is because new money enters the system through bank loans. Naturally, banks want to lend against hard assets, so the first thing that new money buys is property, stocks and other income producing assets.
- natrius 11y agoThis time is different. The new money enters the system via central bank asset purchases, which lower the returns on those assets. These purchases push investors into asset classes with higher returns, raising the prices of all assets as a result.
- maxerickson 11y agoAn additional buyer shouldn't have the effect of lowering the rate of return on an asset.
- merpnderp 11y agoMore money chasing the same asset will lower its rate of return.
- natrius 11y agoThis ain't any old additional buyer. This buyer prints its own money. http://www.economist.com/blogs/economist-explains/2015/03/economist-explains-5 http://www.economist.com/blogs/economist-explains/2015/03/ec...
- danieltillett 11y agoThis explains the how, but not the why. I have found in life the best way to work out why something happens is to follow the money.