Rampant speculation in the stock market — you ain’t seen nothing yet. Thank the Federal Reserve

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'It’s time for investors who have made money in the stock market over the past decade to say thank you to the Fed. Now comes the hard part.'

Investors’ goal is to make money consistently in all market conditions — amid rampant speculation, a good or bad economy, a pandemic, varied Federal Reserve policies.

It’s a big milestone. Finally the tutoring of the Fed, supposedly an independent body, by politicians is complete — it’s all about “not thinking” — not thinking about how to ultimately unwind the massive balance sheet the Fed is building and the massive national debt that politicians are happy to undertake.

• Start from the left-hand side of the chart. The chart shows that in 2007, before the 2008 Great Recession, the Federal Reserve balance sheet was $0.87 trillion. • The chart shows the rise in the stock market coincided with more money printing by the Fed. As the Fed printed more money, it went into assets such as stocks, bonds and real estate. Those with capital got richer. Working-class people who were depending on their labor and not on capital got relatively poorer — therein lies the root of income inequality in our society.

• The chart shows that the stock market threw a big tantrum. In December 2018, as shown on the chart, the stock market quickly fell about 20%.

 

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