- Aug 4, 2009
- 281,368
- 142,407
- 2,615
- Thread starter
- #41
This is due primarily to the Federal Reserve, which has taken absolutely unprecedented steps to support the housing market. It has created enormous amounts of liquidity - literally nearly $2 trillion - to support the housing and mortgage markets. This ocean of liquidity is now gushing into asset markets such as stocks and bonds. These are the same conditions that created the housing bubble, and the people who run the Federal Reserve are absolutely clueless in the roll they play in creating bubbles all around the world.
The other thing that is gunning stock markets is China. China jammed $500 billion into its financial system over the past year, literally forcing banks to lend to projects that will ultimately prove to be unprofitable. This is supporting industrial, manufacturing, materials and energy companies as China builds factories and buildings it does not need.
The economy is getting better, but stocks are now expensive, and this is now a momentum-chasing market.
This will go on for awhile, perhaps 2 or 3 years. But when it ends, there is a very high risk that we will eventually crash down and re-test the lows.
The amazing thing to me is that we have not learned a thing from the housing bubble. The people who run monetary policy in this country are incompetent. When the next bubble collapses, we may not have enough stimulus to support anything, and we will be SOL.
Wouldn't the fact that investors are borrowing and then putting their money into stocks be the fault of the investors and not the Fed? Just saying.
And isn't the bubble effect going to tempered by all the new financial regulations that are going into place?
The Government put $800 billion into the economy and the market increased by $6 trillion
It is obvious the increase was due to "government interference"