8 ms·

Yet the S&P500 is still green. The Fed continues to print in order to delay the inevitable. Either a currency crisis or hyperinflation.

boromi 6y ago
Bingo, there's also been a huge influx of retail investors fueling the earlier Bull rise
- MiroF 6y ago
  This is just not how the stock market works. "More investors" doesn't trigger price increases.
  - boromi 6y ago
    Markets go up when the amount of bullish positions outnumber the amount of new bearish positions
    - MiroF 6y ago
      Depends on the size of the various positions. If a bunch of new (and naive) investors enter the market with irrationally bullish positions, institutional investors will short and profit off of the fundamentals. Bad positions are just an opportunity for arbitrage.
mullingitover 6y ago
Savings rates are through the roof right now, I would worry more about a deflation spiral.
- ed25519FUUU 6y ago
  You may be biased as a WFH/silicon valley type (continuing to produce income despite shelter at home). The median checking account balance was $3,400 in 2019, and that was before COVID19 struck. There's a lot of people who were already barely hanging on, and now covid and demonstrations have pulled the rug out from under them. We're only 2 months in. Things will get worse before they get better. 1. https://www.valuepenguin.com/banking/average-checking-account-balance https://www.valuepenguin.com/banking/average-checking-accoun...
  - pkaye 6y ago
    > The median checking account balance was $3,400 in 2019, and that was before COVID19 struck. Does that count money market and savings accounts? And given interest rates are so low I wonder if people invest in more riskier stuff.
    - Avicebron 6y ago
      People need capital to invest. A lot of people are floating by with that 3,400, not strategically holding only 3,400 in their bank account while they make their fortune on risky investments.
  - Avicebron 6y ago
    Yeah, most of the US is one medical emergency from absolute financial ruin. It's amazing to see how disconnected the economy is from the lived experience of the majority of people.
    - MattGaiser 6y ago
      > Yeah, most of the US is one medical emergency from absolute financial ruin. Most Americans have health insurance of some form.
      - Avicebron 6y ago
        If I have 3,400 to my name and my deductible is 2,000 (common from what I've seen). And my rent is 1,500 due next week, I'm not in good shape financially.
      - xzel 6y ago
        And most would still be stuck with a huge bill with a trip to the ER.
      - acdha 6y ago
        You’re missing several important details: 1. Insurance only pays some fraction of what can be very high bills, and providers notoriously send bill-like invoices trying to get you to pay for things which were paid in full by your insurance company. Many people will be pressured to pay things and uncomfortable standing up to a huge provider’s legal department. 2. Many employers have favored plans which increase deductibles, and the people with the worst plans are also paid the least and so will struggle to have enough cash in reserve for those larger payments. 3. Hospitals commonly have unrelated specialists show up for a couple minutes to add billable consultation hours. If one of those doctors isn’t covered by your plan, you get the bill even if the hospital itself is in network or you were, say, unconscious at the time or unaware that you could turn down their “help”. 4. Insurance is tied to employment: if you have a medical emergency which affects your ability to work, guess what happens to your coverage?
qeternity 6y ago
Or worse: BAML had a great piece recently that QEternity (cough) has actually stoked deflation by reducing low-risk asset yields to zero, which forces many savers to save more as relatively risk-free income disappears, which lowers consumption and thus inflation, prompting more QE...rinse and repeat.
- aaronblohowiak 6y ago
  Oooh, do you have a link?
arberx 6y ago
Or deflation, a bigger worry as consumers might be expecting lower prices in the future and delaying purchases. Leading to a deflationary spiral.
- mindslight 6y ago
  Given the natural resource depletion caused by our economy, plus technological progress implying that we all should be working less, how is this remotely worrying? We've had strong deflation in the tech sector for over four decades, and the results have been fantastic.
cft 6y ago
I wonder who downvotes this and why.
- pphysch 6y ago
  "Lalala I cant hear you, stonks go UP" probably
- diogenescynic 6y ago
  Probably someone who actually looked into what QE actually does--it's more deflationary than inflationary. Look at Japan--they've been doing forms of QE for decades. These Fed printing money, inflation trolls are almost never right even though they've been screaming about it for decades.
  - kovacs 6y ago
    Trolls? Sounds like YOU need to understand what QE is. From Wikipedia... "Quantitative easing (QE) is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity." Sounds pretty inflationary to me. Especially when they buy up illiquid mark to fantasy assets that nobody wants and unloads them on the taxpayer to foot the bill while their buddies get a wad of cash to redeploy, into the stock market as it turns out. How is that not inflationary exactly? Oh, the destruction of those bad assets? Yeah I suppose but the socialization of that across America hides that and what's left is pumped up asset prices that cause the average American to have to work even harder to save up to buy and get worse returns because the fed's buddies got in first and drove prices higher. Have you happened to look at the price of assets since 2008 vs. the actual recovery of the economy? Have you seen that S&P earnings were flat to down for the past 4 years going into this crisis? Yet what's happened to stocks? That's right they've tripled since 2009. Go look at any piece of real estate now almost anywhere vs. 10-20 years go and tell me there's been no inflation. I realize it's different everywhere but the idea that we've had "low inflation" over the last 10 years is completely laughable because the calculation removes the highest cost items. The fed has effectively destroyed any price discovery on any assets. It's taken increasingly larger amounts of QE to goose the fake economy. And now for its encore it has overreacted to save their buddies and decided to lower rates to zero and tell the world that it will never let assets fall. How in the world is that not inflationary when you're flooding the market with free money and enabling those at the top to buy up assets and run up prices? Every single person that works to earn USD and saves USD should be livid and rioting in the streets for the theft that's been, and continues to occur. Also, your example of Japan isn't apples to apples. The US has the world's reserve currency and can print as much of it as it wants, Japan does not. Japan is a nation of savers so getting them to spend is harder than a US citizen. We may have short term deflation and that's what the fed is scared of but make no mistake about it what they've done is inflationary as they will well overshoot whatever deflationary impact any failures have. Hell, they've made it clear that's what they're gonna do.
CPLX 6y ago
Hyperinflation is not typically something you're going to worry about in a demand collapse situation.
- MiroF 6y ago
  None of these people have a solid grasp of macro, it's really no use arguing.
MattGaiser 6y ago
Household incomes rose because of the stimulus. https://www.bea.gov/news/2020/personal-income-and-outlays-april-2020 https://www.bea.gov/news/2020/personal-income-and-outlays-ap... https://tradingeconomics.com/united-states/personal-savings#:~:text=Personal%20Savings%20in%20the%20United,percent%20in%20July%20of%202005 https://tradingeconomics.com/united-states/personal-savings#.... So millions are defaulting, but millions of others are awash in newfound cash and savings.
- thephyber 6y ago
  That bump was for the April period. May isn't likely to look as rosy.
viburnum 6y ago
Not every inflation is a hyperinflation. Look at inflation in America in the 1945-1951 or the 1970s. It wasn’t the end of the world. A little inflation is easier to deal with than mass unemployment and bankruptcy.
MiroF 6y ago
The Fed targets inflation and can do so pretty precisely - massive amounts of QE are in order to combat deflationary pressure in the economy right now.
anm89 6y ago
There is massive demand for dollars worldwide, specifically related to dollar denominated debt and commodities contracts and the first part is likely to get more intense if there is a global recession. I'm a gold bug libertarian end the fed kind of guy and even I don't think we are at any risk for hyperinflation. That is definitely not to say these policies can't have seriously negative consequences but I don't think hyperinflation is one of them, at least not for the US in the next decade.
elevenoh 6y ago
The inevitable increase in productivity brought by the promise of robotics, ai & automation? ;)

boromi 6y ago

Bingo, there's also been a huge influx of retail investors fueling the earlier Bull rise

MiroF 6y ago
This is just not how the stock market works. "More investors" doesn't trigger price increases.
- boromi 6y ago
  Markets go up when the amount of bullish positions outnumber the amount of new bearish positions
  - MiroF 6y ago
    Depends on the size of the various positions. If a bunch of new (and naive) investors enter the market with irrationally bullish positions, institutional investors will short and profit off of the fundamentals. Bad positions are just an opportunity for arbitrage.

mullingitover 6y ago

Savings rates are through the roof right now, I would worry more about a deflation spiral.

ed25519FUUU 6y ago
You may be biased as a WFH/silicon valley type (continuing to produce income despite shelter at home). The median checking account balance was $3,400 in 2019, and that was before COVID19 struck. There's a lot of people who were already barely hanging on, and now covid and demonstrations have pulled the rug out from under them. We're only 2 months in. Things will get worse before they get better. 1. https://www.valuepenguin.com/banking/average-checking-account-balance https://www.valuepenguin.com/banking/average-checking-accoun...
- pkaye 6y ago
  > The median checking account balance was $3,400 in 2019, and that was before COVID19 struck. Does that count money market and savings accounts? And given interest rates are so low I wonder if people invest in more riskier stuff.
  - Avicebron 6y ago
    People need capital to invest. A lot of people are floating by with that 3,400, not strategically holding only 3,400 in their bank account while they make their fortune on risky investments.
- Avicebron 6y ago
  Yeah, most of the US is one medical emergency from absolute financial ruin. It's amazing to see how disconnected the economy is from the lived experience of the majority of people.
  - MattGaiser 6y ago
    > Yeah, most of the US is one medical emergency from absolute financial ruin. Most Americans have health insurance of some form.
    - Avicebron 6y ago
      If I have 3,400 to my name and my deductible is 2,000 (common from what I've seen). And my rent is 1,500 due next week, I'm not in good shape financially.
    - xzel 6y ago
      And most would still be stuck with a huge bill with a trip to the ER.
    - acdha 6y ago
      You’re missing several important details: 1. Insurance only pays some fraction of what can be very high bills, and providers notoriously send bill-like invoices trying to get you to pay for things which were paid in full by your insurance company. Many people will be pressured to pay things and uncomfortable standing up to a huge provider’s legal department. 2. Many employers have favored plans which increase deductibles, and the people with the worst plans are also paid the least and so will struggle to have enough cash in reserve for those larger payments. 3. Hospitals commonly have unrelated specialists show up for a couple minutes to add billable consultation hours. If one of those doctors isn’t covered by your plan, you get the bill even if the hospital itself is in network or you were, say, unconscious at the time or unaware that you could turn down their “help”. 4. Insurance is tied to employment: if you have a medical emergency which affects your ability to work, guess what happens to your coverage?

qeternity 6y ago

Or worse: BAML had a great piece recently that QEternity (cough) has actually stoked deflation by reducing low-risk asset yields to zero, which forces many savers to save more as relatively risk-free income disappears, which lowers consumption and thus inflation, prompting more QE...rinse and repeat.

aaronblohowiak 6y ago
Oooh, do you have a link?

arberx 6y ago

Or deflation, a bigger worry as consumers might be expecting lower prices in the future and delaying purchases. Leading to a deflationary spiral.

mindslight 6y ago
Given the natural resource depletion caused by our economy, plus technological progress implying that we all should be working less, how is this remotely worrying? We've had strong deflation in the tech sector for over four decades, and the results have been fantastic.

cft 6y ago

I wonder who downvotes this and why.

pphysch 6y ago
"Lalala I cant hear you, stonks go UP" probably
diogenescynic 6y ago
Probably someone who actually looked into what QE actually does--it's more deflationary than inflationary. Look at Japan--they've been doing forms of QE for decades. These Fed printing money, inflation trolls are almost never right even though they've been screaming about it for decades.
- kovacs 6y ago
  Trolls? Sounds like YOU need to understand what QE is. From Wikipedia... "Quantitative easing (QE) is a monetary policy whereby a central bank buys government bonds or other financial assets in order to inject money into the economy to expand economic activity." Sounds pretty inflationary to me. Especially when they buy up illiquid mark to fantasy assets that nobody wants and unloads them on the taxpayer to foot the bill while their buddies get a wad of cash to redeploy, into the stock market as it turns out. How is that not inflationary exactly? Oh, the destruction of those bad assets? Yeah I suppose but the socialization of that across America hides that and what's left is pumped up asset prices that cause the average American to have to work even harder to save up to buy and get worse returns because the fed's buddies got in first and drove prices higher. Have you happened to look at the price of assets since 2008 vs. the actual recovery of the economy? Have you seen that S&P earnings were flat to down for the past 4 years going into this crisis? Yet what's happened to stocks? That's right they've tripled since 2009. Go look at any piece of real estate now almost anywhere vs. 10-20 years go and tell me there's been no inflation. I realize it's different everywhere but the idea that we've had "low inflation" over the last 10 years is completely laughable because the calculation removes the highest cost items. The fed has effectively destroyed any price discovery on any assets. It's taken increasingly larger amounts of QE to goose the fake economy. And now for its encore it has overreacted to save their buddies and decided to lower rates to zero and tell the world that it will never let assets fall. How in the world is that not inflationary when you're flooding the market with free money and enabling those at the top to buy up assets and run up prices? Every single person that works to earn USD and saves USD should be livid and rioting in the streets for the theft that's been, and continues to occur. Also, your example of Japan isn't apples to apples. The US has the world's reserve currency and can print as much of it as it wants, Japan does not. Japan is a nation of savers so getting them to spend is harder than a US citizen. We may have short term deflation and that's what the fed is scared of but make no mistake about it what they've done is inflationary as they will well overshoot whatever deflationary impact any failures have. Hell, they've made it clear that's what they're gonna do.

CPLX 6y ago

Hyperinflation is not typically something you're going to worry about in a demand collapse situation.

MiroF 6y ago
None of these people have a solid grasp of macro, it's really no use arguing.

MattGaiser 6y ago

Household incomes rose because of the stimulus. https://www.bea.gov/news/2020/personal-income-and-outlays-april-2020 https://www.bea.gov/news/2020/personal-income-and-outlays-ap... https://tradingeconomics.com/united-states/personal-savings#:~:text=Personal%20Savings%20in%20the%20United,percent%20in%20July%20of%202005 https://tradingeconomics.com/united-states/personal-savings#.... So millions are defaulting, but millions of others are awash in newfound cash and savings.

thephyber 6y ago
That bump was for the April period. May isn't likely to look as rosy.

viburnum 6y ago

Not every inflation is a hyperinflation. Look at inflation in America in the 1945-1951 or the 1970s. It wasn’t the end of the world. A little inflation is easier to deal with than mass unemployment and bankruptcy.

MiroF 6y ago

The Fed targets inflation and can do so pretty precisely - massive amounts of QE are in order to combat deflationary pressure in the economy right now.

anm89 6y ago

There is massive demand for dollars worldwide, specifically related to dollar denominated debt and commodities contracts and the first part is likely to get more intense if there is a global recession. I'm a gold bug libertarian end the fed kind of guy and even I don't think we are at any risk for hyperinflation. That is definitely not to say these policies can't have seriously negative consequences but I don't think hyperinflation is one of them, at least not for the US in the next decade.

elevenoh 6y ago

The inevitable increase in productivity brought by the promise of robotics, ai & automation? ;)