I was chatting with a friend today about the 120B/month being poured into the markets from the Fed, and a similar number from the ECB, in addition to other "artificial" economic support. There was a spot on BB news about how this money is elevating the markets. He said, "The Fed will do what they want. The QE will cease when they want it to," and "A rising tide lifts all boats." ..is there no natural check and balance against rampant money printing? This is not a "tide," because the tide goes in and out. This is a tsunami of money printing! - One would think inflation, but that's not happening. - Of course, a war would be a game-changer, but if it comes to that I'll be little more than an ash stain on the sidewalk anyway. Is this the "new normal" for markets? We just keep printing money forever? Is there no natural check or balance to this spectacular display of money printing?
It was It was a 2-min spot on BB this morning by Matthew Hornbach from Morgan Stanley. Hopefully it will be published soon. It hit a nerve with me... let me know if you find it.
Of course this is not the new normal. A country can't just print and invent and flood money everywhere. Inflation. Powell, the FED, Biden...are all in denial of it. Every President... wants a sky-high stock market to exists during their term, at whatever the costs. And let the next President deal with the fallout mess. That's the crown jewel of a President's success...an ever-increasing stock market chart/economy. There's two more Covid variants on the way...it never ends...it's like the Fast and the Furious and Mission Impossible movie franchises. As long as there is Covid, Governments will continue to pump and spend money artificially out the whazooo fertilizing everything.
Don't waste time arguing with people who don't know how QE works. The Fed and ECB have mandates around inflation and unemployment. When those targets are hit, they will reduce liquidity. That is what they have said. The problem that they are facing is that we are in the middle of a deflationary overhang -- and until that dynamic changes, QE in some form will need to exist in order to facilitate liquidity.
There are no real checks and balances. The only way the printing will stop is: 1) US Bond Market Finally signals doubt in the US integrity (bond market is mostly controlled) 2) Some president who has the balls will stop it (very doubtful ever) 3) A war happens and another county wins, US defaults on its debt and winner takes the reserve currency spot (this will certainly happen at some point) The main asset of the US is its wealthy boomer population of consumer spenders. US buys most everything from other countries. As this huge group of wealthy consumers dies off, and the US is no longer the worlds consumer goods buyer, this will end the US dominant position. The US dollar and debt at this point will begin to be questioned fully. The fact that a virus has emerged that attacks mostly OLDER people is most curious as it will hasten the die off of the US boomer consumer group. As a younger, next generation country, US looks very weak and vulnerable indeed. The younger generation of the US are not smart or hard working and have small disposable incomes. The only way to keep this slacker class buying and spending as the boomers did is to keep floating cheap, easy debt, credit cards, auto loans, home loans, school loans, quick loans. A new class of reddit pump and dump stocks will help them to become even more impulsive, unstable and emotional financially.
The trends in demographics, technology, and debt are deflationary. Here are some good articles: Start here --> HIM2021Q2NP.pdf (hoisington.com) Then --> The Coronavirus Is Sending the Global Economy Toward Deflation, Not Inflation (foreignpolicy.com) All roads lead to Japan --> Lessons from Japan | Financial Times (ft.com)