3 ms·
Not that simple. Not that simple at all. You can't prop-up anything artificially. Once the artifice disappears --and it always does-- if a solid infrastructu
by rebootthesystem 12y ago
Not that simple. Not that simple at all. You can't prop-up anything artificially. Once the artifice disappears --and it always does-- if a solid infrastructure isn't in place failure is almost guaranteed.
Here's another imperfect analogy: Movie marketing. My rule of thumb is: If a motion picture is marketed with more intensity than the average picture it is almost certainly bad. Let's equate the marketing to QE. While marketing is in place lots of people go to see the movie. Artificially. Once it stops, the foundation is so weak (the movie is so bad) that viewer traffic pretty much evaporates.
This is not intended to be an accurate analogy. Please don't waste any time tearing it apart with minutiae arguments because it is flawed in a million ways. The point is to make an attempt to illustrate that an artificially stimulated market is exactly that, an artificially stimulated market that might not be able to remain healthy on it's own
So, people buy homes because interest rates are low yet their station in life, their salary, their income, their savings don't improve one iota and when QE stops, interest rates come in and inflation follows and quite a few of these people simply can't afford what they bought. This, of course, isn't a new concept.