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The biggest danger of all this money in index funds is that the market becomes to big to fail and the government has to keep propping it up. In fact, it become
by blazespin 8y ago
The biggest danger of all this money in index funds is that the market becomes to big to fail and the government has to keep propping it up. In fact, it becomes a way to actually disburse wealth - enact policies such that they go to people in the market.
- fma 8y agoChina did that in 2015 when stock were tanking. "...forced state-owned brokers to promise to buy stocks until the index reached a higher level, mobilized state-controlled funds to purchase equities, and promised unlimited support from the central bank. " https://www.brookings.edu/opinions/making-sense-of-chinas-stock-market-mess/ https://www.brookings.edu/opinions/making-sense-of-chinas-st...
- C1sc0cat 8y agoThey tried that in 1929 with the Great Crash - it didn't work long-term.
- lotsofpulp 8y agoIt’s not index funds that cause the market to be too big to fail. Pension fund investments and 401k investments also go to the same place, index funds just take out the middle man and reduce costs. And yes, that’s why you should be long on mid-large cap equity indexes, because they will always get bailed out, since too many voters are too invested in them. Either more money will be printed or cash infusion or loans from taxpayer, but in any case, the biggest sectors will never fail completely as they will always be re-inflated (in the US, as long as its currency and military continue to have the most power).