This is the inflation that everyone is afraid of. Since the money has been mostly injected from the top of the society, it has been confined to the asset bubble. If this money filters through to the bottom or there's significant injection directly to the bottom (SBA payment protection, $1200 direct assistance, basic income, etc) then we will see consumer inflation as well
Quantity times velocity equals GDP times price level. Velocity just went way down.
This is the right start. But it's not a closed system: there's an import/export balance.
Worth reading all chapters that are in here, but chapter 3 gets at the meat of where we're heading. We're at the end of a long credit cycle post WWII, dislocation of the dollar from the gold standard, to bretton woods, to now QE printing of money being loaned to the government by the fed. Market reflects the cash flow available being printed by the FED to keep the markets up. https://www.principles.com/the-changing-w…
The dollar plumbing relative to what? Not other currencies by the looks of it.
Relative to assets, real estate, stocks, gold etc. Money is getting created in enormous quantities very quickly, while assets cannot be created so quickly. So all currencies are getting devalued relative to assets.
The dollar has already plummeted compared to assets. Real estate is ridiculously expensive when measured in dollar, same for stocks too.
Faith in humanity: buy stocks. No faith in humanity: buy gold. Large cap stocks are to some degree an international investment. REITs: well they are down, maybe more of an opportunity if only because the good stocks are so high.
> Faith in humanity: buy stocks. No faith in humanity: buy gold. Speaking to a friend who bought stocks recently, they said, "I'm bullish on America." I might say if you are the opposite of bullish, then buy gold. And if you have no faith in humanity, buy a survivalist bunker.
> And if you have no faith in humanity, buy a survivalist bunker.
What’s the rent on a bunker these days? If it’s cheaper than an apartment in SF I might go in on it
Current price = future price. Principle of economics and pricing. Meaning an asset is priced according to what someone thinks it'll be worth in the future. Let's also not forget the massive sell off in the markets not too long ago. And as someone else said, there's also nowhere else to put money. All these are reasons why people would buy into the market right now. Or hey, it also could just be a dead cat bounce...
https://archive.is/cmMx5 It's a decent article. Here are their 5 reasons: 1. Bets on a “V-Shaped” Recovery 2. Market Leaders Keep Rising 3. Corporate-Earnings Expectations Remain High 4. Old Habits Die Hard 5. The Fed’s Backing Personally, I'm betting we're still headed to a bloodbath, but slowly. This quarter's earnings are expected to be terrible, so this is already priced in. But the market is expecting a recovery…
There's still a real possibility that there might actually be a full recovery - what's closing is small businesses, not megacorporations. The rich seem to do just fine even now. Even if most individual restaurants close, some will open back up, and more chains will move back in. In every scenario I can imagine, one thing seems inevitable - most people in this world are going to get poorer and suffer more. But I'm not…
Megacaps don't just print money out of thin air. If you have a faltering middle class, who's gonna be there to spend money? Unless you institute some kind of universal basic income, I don't see people's buying power staying the same. Remember, 70% of the economy is driven by people buying shit.
The bulk of the Fed intervention is in the bond market, particularly Treasuries. They are also increasing their intervention in the exchange rate market. If the Fed was trying to pump up the stock market, wouldn't they buy stocks? Instead it looks like to me the Fed is essentially financing the US government's fiscal stimulus.
A large portion of the stimulus is going to publicly traded companies, so that would have the effect of propping up stocks that may otherwise trend towards zero.
There are more or less no limits on the stimulus money, so corporations that have issued debt to buy back shares can use it to retire that debt and then issue even more debt in the current hyper-low rate environment. It's essentially a way for companies to transfer the money into the hands of their executive management.
> And as has often been the case in recent years, investors find themselves faced with few attractive alternatives if they opt out of betting on stocks. The problem is so familiar it has its own acronym: TINA, or There Is No Alternative to stocks. Cash: Gets eaten away by inflation. Although the CPI doesn't indicate high inflation it only measures consumer goods. Inflation is there in the price of investments. If you…
How much of the TINA phenomenon could be due to lack of capital formation throughout the economy? e.g. if 90% of America is too capital poor to form businesses or dream up new economic needs, then wouldn't it follow that printing money into existing asset classes would simply raise their price with no viable places to invest the money?