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A potentially more productive view is that the fed cannot support the bubble indefinitely. It's becoming clear that money can be printed without causing inflat

by lumost 6y ago

A potentially more productive view is that the fed cannot support the bubble indefinitely. It's becoming clear that money can be printed without causing inflation if its unevenly distributed in the economy. This amounts to large scale wealth redistribution to support asset price increases. If you earn dollars for a living, your purchasing power in terms of future dollar income is being eroded. You will purchase a home later or never, you may not be able to afford an education, and your medical expenses will rise ( as will anything that affects future earning power ). When this ends is anyones guess, it's entirely plausible that we revert to the social systems of prior less equal times, foreign trade moves off the dollar, assets converge to an effective price of infinite dollars, or populists demand their own redistributive policies such as UBI or wealth taxes. Or the fed meets tomorrow and cuts QE entirely. What is assured is that the current trend is unsustainable and must end eventually.

TuringNYC 6y ago
>> A potentially more productive view is that the fed cannot support the bubble indefinitely. The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not. (yes, i realize the Fed is independent but there is still quite a bit of control)
- lumost 6y ago
  There are many situations where the fed is forced to end its current policies prior to the expected triggers of market stability or increased CPI. Political and social risk is likely underestimated. That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.

by lumost 6y ago

TuringNYC 6y ago

>> A potentially more productive view is that the fed cannot support the bubble indefinitely. The interesting thing is whether "cannot" means the point when they literally can not because the market and inflation wont bear it...or when they wise up to the tinder box they have created. The problem with the latter is -- which administration would allow this to be under their watch. Once a problem is bad enough, you might as well just kick the can a bit more until you literally can not. (yes, i realize the Fed is independent but there is still quite a bit of control)

lumost 6y ago
There are many situations where the fed is forced to end its current policies prior to the expected triggers of market stability or increased CPI. Political and social risk is likely underestimated. That being said, examining the exit paths and forcing functions which would force Fed policy to change is something I'd like to see more of. There is a certain mentality floating around that there are no alternatives to being in the market, and that it's become too politically difficult to end Fed market support. If the latter is true, then there are a lot of consequences - such as returns becoming decoupled from cash flow see TSLA, Unicorns, or Hertz.