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Are you aware of the stock market, housing market, bond market, precious metals? Asset price inflation absolutely is happening. The FED up until now was able to
by ghastmaster 7y ago
Are you aware of the stock market, housing market, bond market, precious metals? Asset price inflation absolutely is happening. The FED up until now was able to keep the CPI increases fairly low even though they were creating trillions of dollars, because the money was locked into assets. This has had a severe effect on anyone in the market for these assets that have risen.
- eru 7y agoHow do the assets lock up money? The stock market, no matter how enormous it's market cap, doesn't lock up any money. When I pay through the nose for Tesla stock, the other fellow then has some money that he either has to spend or park somewhere.
- ghastmaster 7y agoLeverage and subsidies. The money did not exist to begin with, hence the FED balance sheet and gov't debt. The money is funneled into these assets by regulatory incentives 401k, HUD, federal student loans, etc. The seller's money goes toward that as well.
- eru 7y agoI still don't understand. After all those assets have increased in price, the money is still not 'locked up'.
- ghastmaster 7y agoI forgot to mention that China sells us consumer goods at a very low price, keeping CPI down. With the dollars we give them for their goods they purchase US companies, bonds, and real estate. This pushes up prices of the assets they purchase. If the Chinese did not devalue their currency, americans would not be able to afford their products and we would see a rise in the CPI.
- eru 7y agoCheap Chinese goods are indeed a boon to the rest of the world. Very nice of China.
- RobertoG 7y agoI though that, from the Austrian perspective, the stock market would be one of the last things to see inflation. Are not suppose the prices of stocks reflect the aggregate infinite wisdom of the market?
- ghastmaster 7y agoIf the money supply was increased across the board this would likely be the case. However, the FED bank no longer operates in the way it was statutorily mandated originally. The FED purchases assets that inflate the stock market indirectly. The Federal subsidies and regulations combine with this to keep the money propping up the assets mentioned(gold only because of it being a historic hedge).