Retirement Lifestyle Advocates
The economy and financial markets are extremely artificial, with asset prices rising largely due to massive levels of currency created by the Federal Reserve. Artificial economies and artificial markets always, eventually reverse following the basic rules of finance and economics. The late economist Hebert Stein stated that “if something cannot go on forever, it will stop”. That statement is as profound as it is simplistic.
With the Fed staying the course as far as easy money is concerned, look for the real inflation rate to continue to accelerate and look for the Fed to continue to say that inflation is transitory or come up with some other narrative to explain away the rising inflation rate as attributable to something other than reckless Fed policy.
This past week, after the Federal Reserve’s Jackson Hole, Wyoming symposium, Fed Chair, Jerome Powell commented on Fed policy. It was widely anticipated that the Fed Chair would discuss the ‘taper’, or the Fed’s plan to slow the rate at which currency is being created. The Fed Chair, in many respects, disappointed!
Is a Stock Crash Imminent? For more than a couple of years, I have been of the opinion that stocks have been overvalued. Over that time frame, except for early 2020, stocks have continued to rise.
Many of the world’s central banks are beginning to raise interest rates in response to higher levels of inflation.
An important anniversary is approaching this week. Although it won’t be widely observed or likely even mentioned, it’s the anniversary of the event that led to current economic and investing conditions.
The basic laws of economics and finance have not changed. At some future point, this will become evident with economic conditions emerging that are unpleasant at best. We are already beginning to see evidence of changing economic conditions.
Globally, both in the public sector and the private sector debt levels are literally at nosebleed levels.
Fed leadership and some politicians have insisted that inflation is transitory or temporary and that once the economy fully reopens, things will return to a more ‘normal’ state as far as inflation is concerned.
While doing my research this past week, I found an article published on “Bloomberg” that offered some great perspective on the amount of currency that has been created literally out of thin air since early in calendar year 2020.