4 ms·

I'd argue the equities are trading so high is preciesly because of the action the government is taking. By lowering interest rates and offering low interest loa

by hpoe 6y ago

I'd argue the equities are trading so high is preciesly because of the action the government is taking. By lowering interest rates and offering low interest loans in an attempt to prevent deflation the fed has pushed a ton of money into the economy with the result that deflation is increasing. Because of that people have to put their money in something that will increase in value as inflation increases, the result being that tons of money is being pumped into equities which further drives up the price making them more attractive, because the government is pumping more money into the economy to prevent deflation. This pandemic to me shows the fundemental problem with a lot of the fancy economic theories we've been living off of and the parasitic "financial engineers" fundamental failing. You can play all the games you want with numbers and spreadsheets to make it look like there is more money than there actually is, but you can't magically change the amount of stuff their is to buy. As such it doesn't matter what measure you use or what KPI you look at for the economy, if there isn't enough crap being produced for people to buy it at a reasonable price there isn't enough crap to buy, and telling people the economy is doing great when I can't afford a roast for dinner doesn't mean jack to me or anyone else.

TAForObvReasons 6y ago
The Fed pushed a ton of money in a very inefficient manner. If congress approved another round of direct stimulus and bolstered the unemployment programs, people who are now struggling would have funds to make ends meet and could stimulate the economy. Instead, by purchasing large amounts of junk bonds, the Fed basically backstopped Wall Street, leading to the all-time highs in the stock market indices. The stock market completely decoupled from the economic reality on main street
- kmonsen 6y ago
  I just posted the same as you. Just a minor comment, I do not believe this is inefficient, but their target is not the economy but the rich. There is no way an economist does not know what you said.
  - TAForObvReasons 6y ago
    It's arguably inefficient from the perspective of the dual mandate (price stability and maximum sustainable employment), but what the fed did would be efficient under the view that employment is too high to be sustainable.
    - vkou 6y ago
      That makes sense on a macro-economic level, but is an absolutely insane policy in a country with so few safety nets.
  - deleted 6y ago
    [deleted]
- the-dude 6y ago
  Isn't this true since the GFC? ( 2008 ) I had friends 'in the market' who felt the rebounds after 9/11 were suspect already.
kmonsen 6y ago
I mean all reasonable honest economists know this. The goal of the current program is to subsidize the 1% by making sure the stock market it stabilized and keeps growing. If you want to actually help the economy you helicopter drop stimulus checks. The lower 95% spend more money when they have more, the top 5%/1%/.01% don't see a meaningful difference in their spending power.
- dternyak 6y ago
  > If you want to actually help the economy you helicopter drop stimulus checks. I think this is a bit simplistic. This is also how you get hyperinflation. Perhaps the government should just have a clean separation from money, much like they do from state?
  - legulere 6y ago
    Which inflation? There is no inflation.
  - dternyak 6y ago
    edit: much like they do from church
- syshum 6y ago
  I am far from the top 5%/1%/.01%, and do not spend more money they I have... Infact for the last 15 years I have made it a point to monthly expenses be less than 50% of my net income, which meant living with family, having room mate, Driving a very old car or doing other things to lower my expenses.
  - TAForObvReasons 6y ago
    parent wrote > The lower 95% spend more money when they have more This isn't saying that the bottom 95% are incurring massive debt or "living beyond means". It's just saying that if you give someone in the bottom 95% an extra $100, they'll likely spend some of that money. If you give Bezos or Gates or Buffett $100, it's such an inconsequential sum to them that it wouldn't change their spending
andrewmcwatters 6y ago
Fed Put
conductr 6y ago
There's two things I don't see people talk about much. They are forgotten forces I suppose. 1) Inflation. You're living it. The stock market is inflationary. Printing money creates inflation. Yet somehow they will make everyone believe 2020 saw 2% inflation. The market is telling us it expects inflation to be higher; maybe. You don't want to hold cash or low interest bonds going into an inflationary period. 2) Global demand for US equities. If there is a global financial crises/disruption, and there should be, people view US stocks as safer than all other stocks. Money managers would be moving out of other stocks and into US stocks. Demand drives up price. It needs no further rationalization than risk management with limited optionality of where to put their money. US stock prices could be ridiculously overpriced on fundamentals but may still be viewed as safer than their emerging market alternatives.

by hpoe 6y ago

TAForObvReasons 6y ago

The Fed pushed a ton of money in a very inefficient manner. If congress approved another round of direct stimulus and bolstered the unemployment programs, people who are now struggling would have funds to make ends meet and could stimulate the economy. Instead, by purchasing large amounts of junk bonds, the Fed basically backstopped Wall Street, leading to the all-time highs in the stock market indices. The stock market completely decoupled from the economic reality on main street

kmonsen 6y ago
I just posted the same as you. Just a minor comment, I do not believe this is inefficient, but their target is not the economy but the rich. There is no way an economist does not know what you said.
- TAForObvReasons 6y ago
  It's arguably inefficient from the perspective of the dual mandate (price stability and maximum sustainable employment), but what the fed did would be efficient under the view that employment is too high to be sustainable.
  - vkou 6y ago
    That makes sense on a macro-economic level, but is an absolutely insane policy in a country with so few safety nets.
- deleted 6y ago
  [deleted]
the-dude 6y ago
Isn't this true since the GFC? ( 2008 ) I had friends 'in the market' who felt the rebounds after 9/11 were suspect already.

kmonsen 6y ago

I mean all reasonable honest economists know this. The goal of the current program is to subsidize the 1% by making sure the stock market it stabilized and keeps growing. If you want to actually help the economy you helicopter drop stimulus checks. The lower 95% spend more money when they have more, the top 5%/1%/.01% don't see a meaningful difference in their spending power.

dternyak 6y ago
> If you want to actually help the economy you helicopter drop stimulus checks. I think this is a bit simplistic. This is also how you get hyperinflation. Perhaps the government should just have a clean separation from money, much like they do from state?
- legulere 6y ago
  Which inflation? There is no inflation.
- dternyak 6y ago
  edit: much like they do from church
syshum 6y ago
I am far from the top 5%/1%/.01%, and do not spend more money they I have... Infact for the last 15 years I have made it a point to monthly expenses be less than 50% of my net income, which meant living with family, having room mate, Driving a very old car or doing other things to lower my expenses.
- TAForObvReasons 6y ago
  parent wrote > The lower 95% spend more money when they have more This isn't saying that the bottom 95% are incurring massive debt or "living beyond means". It's just saying that if you give someone in the bottom 95% an extra $100, they'll likely spend some of that money. If you give Bezos or Gates or Buffett $100, it's such an inconsequential sum to them that it wouldn't change their spending

andrewmcwatters 6y ago

Fed Put

conductr 6y ago

There's two things I don't see people talk about much. They are forgotten forces I suppose. 1) Inflation. You're living it. The stock market is inflationary. Printing money creates inflation. Yet somehow they will make everyone believe 2020 saw 2% inflation. The market is telling us it expects inflation to be higher; maybe. You don't want to hold cash or low interest bonds going into an inflationary period. 2) Global demand for US equities. If there is a global financial crises/disruption, and there should be, people view US stocks as safer than all other stocks. Money managers would be moving out of other stocks and into US stocks. Demand drives up price. It needs no further rationalization than risk management with limited optionality of where to put their money. US stock prices could be ridiculously overpriced on fundamentals but may still be viewed as safer than their emerging market alternatives.