For many years, decades even, I’ve written about how all the tax tricks targeted for giant corporations and rich investors, government subsidies and tax avoidance loopholes, marketplace protections, fiscal + monetary stimulus have created a Bubble-Blowing Bull Market environment that has long artificially juiced investor gains.
Here’s an example from October 20, 2014:
The markets and the Fed, Fed, Fed
My analysis points to more economic improvement, even for employment and Main Street in months ahead and inflation at the grocery store accelerating — though I don’t think that means the Fed’s going to react to those realities anytime soon.
With continued cheap money for corporations, margin-enhancing policies from the government at all levels and 0% rates still forcing savers into risk assets etc, I expect we still have more bubble-blowing bull market ahead of us. By the time the Fed finally acts to ‘tighten,’ the bubbles will likely be much bigger than they currently. Important to remember too, is that the bubbles will actually probably continue to inflate even after the Fed starts to tighten.
You can’t flood the corporate economy and force savers into risky assets like stocks for years on end and then contain the effects of those policies by cutting back on your pumping. Jawboning the end of excessive, emergency liquidity measures isn’t going to change anything, though it will likely give you a small-term market correction if and when the FED finally actually ends all forms of QE.
0% interest rates are going to inflate huge asset bubbles and especially stock market bubbles, as I’ve been saying for five years now. 1% will still cause bubbles. Maybe a 2-3% Federal Funds Rate might start to draw money out of the markets and shift inflation down to a lower gear. So until the 0% interest rate