Blue Mass Group

Reality-based commentary on politics.

Huh?? “Asia Rises on Hopes of More Fed Support”

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The most befuddling thing is happening in the global markets.  It seems foreign markets are excited about poor job numbers in the U.S. because that may cause the Fed to print more free money.

From CNBC.com Asia Rises on Hopes of More Fed Support

Asian markets were off to a positive start Monday, tracking gains on Wall Street and as weak U.S. job data spurred expectations for further stimulus measures by the Federal Reserve.

I’ve grown really tired of these back door bailouts by the Fed.  I don’t entirely understand it, but it seems to me that they’ve been doing plenty of it, and I just don’t see it as a solution that is really helping our economy.  I suppose that it may prevent another market crash, but at this point, is it really a good idea to keep it artifically inflated.  Especially when the next step is to continue to keep it artificially inflated, and then the next step after that is to keep it artificially inflated some more?

There is something so wrong with what is going on.  It’s not a left or right issue; it’s a capitalist gone wild issue.  It’s just not going to work. This is not a free market; it’s a manipulated market.

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Comments

  1. In the sense that they require rules. There is no such thing as a “free market,” after all.

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    p>Can you point to a time in US history when our markets were not manipulated by policy makers.

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    p>A better way to phrase your complaint might be that you don’t like this particular manipulation, perhaps.

    • and it’s clear that my complaint is about how the market is currently being manipulated.  Using the word “free” is seemingly always relative.  An example being that we also live a “free” country. Do we? Really? Relatively speaking, yes, we do.

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      p>To me, a “free market” means a market that is based on the reality of the economy, not the fantasy of showing growth based on the killing of the economy.  The original point of the stock market, and what I believe the stock market’s purpose is, is nicely summed up here:

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      p>

      Function and purpose

      The stock market is one of the most important sources for companies to raise money. This allows businesses to be publicly traded, or raise additional capital for expansion by selling shares of ownership of the company in a public market. The liquidity that an exchange provides affords investors the ability to quickly and easily sell securities. This is an attractive feature of investing in stocks, compared to other less liquid investments such as real estate.

      History has shown that the price of shares and other assets is an important part of the dynamics of economic activity, and can influence or be an indicator of social mood. An economy where the stock market is on the rise is considered to be an up-and-coming economy. In fact, the stock market is often considered the primary indicator of a country’s economic strength and development.

      Rising share prices, for instance, tend to be associated with increased business investment and vice versa. Share prices also affect the wealth of households and their consumption. Therefore, central banks tend to keep an eye on the control and behavior of the stock market and, in general, on the smooth operation of financial system functions. Financial stability is the raison d’être of central banks.

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      p>Times have changed.  A rising stock market does not equal growth in the American economy.  American companies turn around and either hoard their gains, return them to the economy in the form of large bonuses to a few people or dividends to wealthy investors.  The money earned in a rising stock market is simply reinvested in the stock market, instead of the economy.  It no longer serves it’s original purpose.  

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      p>So that is my complaint then.  That the market no longer serves it’s original purpose: to raise capital to invest in the growth of the economy.  It’s purpose now is to create wealth at the expense of the economy. In my view, the Fed is manipulating the markets in such a way that this behavior continues.  I think perhaps they are hoping that by printing free money it will spur investment in job creation and business expansion, however, it is not working.
      I have no idea what other controls they have to try to cause/manipulate market gains to be re-invested in the American economy.  I think we have to show courage here.  The market is expecting more money from the Fed. I think it’s time to let the market reset to where it would be without it, and then allow it grow based on true economic growth, not on wealth gained by economic contraction.

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      p>Thank you for encouraging me to clarify that.

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