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The markets now firmly believe that any real reductions in asset prices are impossible. The fed will always rescue them with bailouts. That’s Just incredibly
by fallingfrog 7y ago
The markets now firmly believe that any real reductions in asset prices are impossible. The fed will always rescue them with bailouts. That’s Just incredibly dangerous and can only lead, in one or two more cycles, to the collapse of the US dollar. That sounds incredible but it we keep on this way I just don’t see any other way this could end.
- AnimalMuppet 7y agoI see a 30% drop in the Dow in the last two months. I see a very real reduction in asset prices, here in concrete reality. You could argue that that wasn't a real reduction, that a real reduction would be 50% or some other number. If that is your argument, it looks to me like moving the goalposts.
- fallingfrog 7y agoRight but my point is, as soon as it happened the fed went into a panic and printed trillions of dollars and started buying junk bonds, giving the impression that they will do whatever it takes to make the market not drop. No matter the cost. And the market shot back up even though there are 26 million people who just lost their jobs. But you know, this is still an unfolding story so who knows, maybe all the free loans in the world won’t help. We’ll find out.
- AnimalMuppet 7y agoOr, maybe you're right, and the market would have fallen a lot further (or at least not recovered) if the Fed had done nothing. And, on that one, we won't even find out, because that's not what the Fed did.
- fallingfrog 7y agoAnd I can see the point too that in the short term in the middle of a crisis, they did what they had to do for the economy to survive. It’s after the crisis is over, and things start recovering, that they are really going to have to make unpopular decisions or reinflate the bubble.
- AnimalMuppet 7y agoAbsolutely agree. Getting back to stability is going to be... interesting.