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Pardon my ignorance of economics, but does US/FED policy and trillion dollar deficits have anything to do with this? Along with other countries printing more mo

by da02 11y ago

Pardon my ignorance of economics, but does US/FED policy and trillion dollar deficits have anything to do with this? Along with other countries printing more money? I remember reading Zimbabwe had the best performing stock market, but it was fueled through the "printing press". And they had no choice but to stop printing more.

bavcyc 11y ago
It is all interconnected, but I'm not sure anyone knows 100% how. I've started studying economics; the more I learn, the more I know that I don't know.
parasubvert 11y ago
Not specifically, though indirectly. The FEDs activities are intended to counter balance the lack of economic activity and investment capital coming out of the banks after the 2008 crises left them having to unwind their debt positions globally. Someone has to keep the fuel spigot on - usually that's the government but most did the opposite (austerity) due to politics. What you're witnessing is a LOT of unused capital sitting around trying to find low risk returns. Interest rates are low so money is cheap, and there are only so many places to park capital, thus... Prices go up. Post 2008 Companies aren't investing as much in the real economy: wages, productive capital, etc. are stagnant. they're profit taking and retaining the profits. What's important to know is that while assets are trending higher historically , these are all mostly paper assets - they're indirectly tied to the real economy, and haven't completely become unhinged yet like in 2000. See http://mobile.nytimes.com/2014/07/08/upshot/welcome-to-the-everything-boom-or-maybe-the-everything-bubble.html http://mobile.nytimes.com/2014/07/08/upshot/welcome-to-the-e... Zimbabwe was a case of hyperinflation. Which is what eventually happens when you have more money than productive capacity - prices of "real stuff" go up fast. But real inflation in the U.S. and Europe is very low by historical standards. We are not going to become Zimbabwe.
- da02 11y ago
  Thanks for clearing that up. What do you think the US govt & FED should/should not do now?
  - parasubvert 11y ago
    I think they should keep doing what they're doing - don't raise rates or reduce the monetary base (the $ trillions they keep on the books since the crisis) until real inflation is clearly setting in. Asset prices can keep inching up so long as they're not into bubble territory (which arguably they're not yet). The economy is in a much better position but it's still underperforming and the labor participation rate is still historically down as so many exited the labor force during the 2008 crisis and ensuing layoffs. Once some inflation sets in, it's a sign the world is returning to "normal" (after 8 years!), but .. no guarantees given instability in Europe, Middle East, Oil Glut, etc. Usual disclaimers: I am not an economist, but minored in it & follow it; the economics profession has a wide diversity of opinions, though I think my views aren't particularly radical. I also think the government should be ready to invest in our crumbling infrastructure for the next downturn/crisis. The 2009 stimulus helped but was not well allocated and was too small. That said it's unlikely congress will pass any such thing for many years due to current politics.

by da02 11y ago

bavcyc 11y ago

It is all interconnected, but I'm not sure anyone knows 100% how. I've started studying economics; the more I learn, the more I know that I don't know.

parasubvert 11y ago

Not specifically, though indirectly. The FEDs activities are intended to counter balance the lack of economic activity and investment capital coming out of the banks after the 2008 crises left them having to unwind their debt positions globally. Someone has to keep the fuel spigot on - usually that's the government but most did the opposite (austerity) due to politics. What you're witnessing is a LOT of unused capital sitting around trying to find low risk returns. Interest rates are low so money is cheap, and there are only so many places to park capital, thus... Prices go up. Post 2008 Companies aren't investing as much in the real economy: wages, productive capital, etc. are stagnant. they're profit taking and retaining the profits. What's important to know is that while assets are trending higher historically , these are all mostly paper assets - they're indirectly tied to the real economy, and haven't completely become unhinged yet like in 2000. See http://mobile.nytimes.com/2014/07/08/upshot/welcome-to-the-everything-boom-or-maybe-the-everything-bubble.html http://mobile.nytimes.com/2014/07/08/upshot/welcome-to-the-e... Zimbabwe was a case of hyperinflation. Which is what eventually happens when you have more money than productive capacity - prices of "real stuff" go up fast. But real inflation in the U.S. and Europe is very low by historical standards. We are not going to become Zimbabwe.

da02 11y ago
Thanks for clearing that up. What do you think the US govt & FED should/should not do now?
- parasubvert 11y ago
  I think they should keep doing what they're doing - don't raise rates or reduce the monetary base (the $ trillions they keep on the books since the crisis) until real inflation is clearly setting in. Asset prices can keep inching up so long as they're not into bubble territory (which arguably they're not yet). The economy is in a much better position but it's still underperforming and the labor participation rate is still historically down as so many exited the labor force during the 2008 crisis and ensuing layoffs. Once some inflation sets in, it's a sign the world is returning to "normal" (after 8 years!), but .. no guarantees given instability in Europe, Middle East, Oil Glut, etc. Usual disclaimers: I am not an economist, but minored in it & follow it; the economics profession has a wide diversity of opinions, though I think my views aren't particularly radical. I also think the government should be ready to invest in our crumbling infrastructure for the next downturn/crisis. The 2009 stimulus helped but was not well allocated and was too small. That said it's unlikely congress will pass any such thing for many years due to current politics.