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The Gov't / Federal Reserve has made it clear they will not let the value of assets drop significantly ever again. The entire planet's capital is now betting o

The Gov't / Federal Reserve has made it clear they will not let the value of assets drop significantly ever again. The entire planet's capital is now betting on US equities going up and to right forever, and all levers will be used and invented wholesale from nothing to keep that going.

epicureanideal 2y ago
At some point though something will happen such that they can’t keep their fist on the scale, and then the market can correct suddenly. Unfortunately government intervention makes it even more unpredictable when that will be.
delfinom 2y ago
Yea, except the inflation we encountered in the last 3 years were directly from trying to keep asset values from dropping. They are at their ropes end. There really isn't that much room between mass inflation vs. the rich keeping their numbers infinity growing.
- selectodude 2y ago
  That’s a fundamental misunderstanding of asset prices vs interest rates.
- SoftTalker 2y ago
  Exactly. The "crash" can happen via exploding inflation, or falling markets. Either way results in the same thing.
omnee 2y ago
This implies that a sustained crash will only happen if/when these two institutions are no longer capable of supporting the market. In effect, it's a bet against the US, which so far has been a losing one.
kortilla 2y ago
The federal reserve literally just got through a monetary tightening policy that paid zero regard to the stock market. The fed will juice to keep employment up and tighten to keep inflation down. They will not support stocks at the expense of those mandates
- roenxi 2y ago
  We're dealing with people who interpret the words "price stability" to mean "prices should increase exponentially, we'd consider it a serious problem if they stayed level". It seems a bit of a stretch to go from that to believing that their mandate constrains them somehow. Their mandate can be interpreted to mean whatever they want it to mean. They're a political beast, they're going to do whatever they can get away with politically while making life comfortable for the banks. And I'd imagine the stock market is still fairly confident that rates are going back down. If we look at a chart of fed interest rates [0] the statistical evidence suggests we're going to see low rates in the near future. It'd be nice to buck the trend and have the US stay focused on prosperity but there isn't much evidence of it yet. The basic plan of high debt then inflating the debt away hasn't changed. [0] https://fred.stlouisfed.org/series/fedfunds https://fred.stlouisfed.org/series/fedfunds
  - snowwrestler 2y ago
    It’s impossible to keep prices perfectly steady, the Fed could not possibly be that precise. If they tried, we would bounce back and forth between inflation and deflation, which would be incredibly destabilizing to long-term investment… and therefore destabilizing to job growth and capital improvement, innovation, etc. So instead the Fed aims for a small amount of inflation. That way when they miss a bit, we still stay out of deflation. It is much better to bounce between 2% and 3% than between -1% and 1%. If the goal was actually to inflate the debt away, they would be aiming higher. Proof: the debt has been growing in real terms, not shrinking.
    - rrrrrrrrrrrryan 2y ago
      The Fed has stated that one benefit of a small amount of inflation is that it provides employers with a mechanism to effectively revise wages downward without employees quitting (by denying them an annual raise), but yes - they have never stated that they are trying to inflate the debt away.
unyttigfjelltol 2y ago
There's more to assets than US equities, the Fed would be far more concerned with serious weakness in the Treasury market, and Treasuries often move inverse of US equities.
d1sxeyes 2y ago
Certainly hope they’ll keep going to the right…
mbar84 2y ago
I wonder if this sets up a moral hazard that only exacerbates a possibly coming crash. People assume the Fed will prevent assets from dropping, which makes them bid up asset prices to even higher levels that even the Fed is incapable of maintaining.

epicureanideal 2y ago

At some point though something will happen such that they can’t keep their fist on the scale, and then the market can correct suddenly. Unfortunately government intervention makes it even more unpredictable when that will be.

delfinom 2y ago

Yea, except the inflation we encountered in the last 3 years were directly from trying to keep asset values from dropping. They are at their ropes end. There really isn't that much room between mass inflation vs. the rich keeping their numbers infinity growing.

selectodude 2y ago
That’s a fundamental misunderstanding of asset prices vs interest rates.
SoftTalker 2y ago
Exactly. The "crash" can happen via exploding inflation, or falling markets. Either way results in the same thing.

omnee 2y ago

This implies that a sustained crash will only happen if/when these two institutions are no longer capable of supporting the market. In effect, it's a bet against the US, which so far has been a losing one.

kortilla 2y ago

The federal reserve literally just got through a monetary tightening policy that paid zero regard to the stock market. The fed will juice to keep employment up and tighten to keep inflation down. They will not support stocks at the expense of those mandates

roenxi 2y ago
We're dealing with people who interpret the words "price stability" to mean "prices should increase exponentially, we'd consider it a serious problem if they stayed level". It seems a bit of a stretch to go from that to believing that their mandate constrains them somehow. Their mandate can be interpreted to mean whatever they want it to mean. They're a political beast, they're going to do whatever they can get away with politically while making life comfortable for the banks. And I'd imagine the stock market is still fairly confident that rates are going back down. If we look at a chart of fed interest rates [0] the statistical evidence suggests we're going to see low rates in the near future. It'd be nice to buck the trend and have the US stay focused on prosperity but there isn't much evidence of it yet. The basic plan of high debt then inflating the debt away hasn't changed. [0] https://fred.stlouisfed.org/series/fedfunds https://fred.stlouisfed.org/series/fedfunds
- snowwrestler 2y ago
  It’s impossible to keep prices perfectly steady, the Fed could not possibly be that precise. If they tried, we would bounce back and forth between inflation and deflation, which would be incredibly destabilizing to long-term investment… and therefore destabilizing to job growth and capital improvement, innovation, etc. So instead the Fed aims for a small amount of inflation. That way when they miss a bit, we still stay out of deflation. It is much better to bounce between 2% and 3% than between -1% and 1%. If the goal was actually to inflate the debt away, they would be aiming higher. Proof: the debt has been growing in real terms, not shrinking.
  - rrrrrrrrrrrryan 2y ago
    The Fed has stated that one benefit of a small amount of inflation is that it provides employers with a mechanism to effectively revise wages downward without employees quitting (by denying them an annual raise), but yes - they have never stated that they are trying to inflate the debt away.

unyttigfjelltol 2y ago

There's more to assets than US equities, the Fed would be far more concerned with serious weakness in the Treasury market, and Treasuries often move inverse of US equities.

d1sxeyes 2y ago

Certainly hope they’ll keep going to the right…

mbar84 2y ago

I wonder if this sets up a moral hazard that only exacerbates a possibly coming crash. People assume the Fed will prevent assets from dropping, which makes them bid up asset prices to even higher levels that even the Fed is incapable of maintaining.