Quick question on the market...

[micahnelson]

When it takes two dollars to buy a loaf of bread that used to cost 1 dollar- thats inflation and it is bad.

When it takes two dollars to buy a stock that used to cost 1 dollar- thats growth, and we are supposed to cheer.

But when we consider that the ONLY positive economic news seems to be from the Dow, is it possible that these higher prices for stocks have as much to do with investors dumping currency as anything else?

If the economy was doing well should we be slipping against the euro, posting profit losses, losing jobs, and see oil and gold spiking?

[Johnnybags]

When it takes two dollars to buy a loaf of bread that used to cost 1 dollar- thats inflation and it is bad.

When it takes two dollars to buy a stock that used to cost 1 dollar- thats growth, and we are supposed to cheer.

But when we consider that the ONLY positive economic news seems to be from the Dow, is it possible that these higher prices for stocks have as much to do with investors dumping currency as anything else?

If the economy was doing well should we be slipping against the euro, posting profit losses, losing jobs, and see oil and gold spiking?

They really believe now that consumers will keep consuming thus earnings go up with Bens inflation and look good. Fact is consumers is headed down and consumer spending is about to drop like a stone. Market seems to think people are going to keep on buying. Inflation always looks good early to the markets, then people adjust. Funny thing here is gas is .50 cheaper now than it was when oil was less? Looks like the margins for big oil are in decline or at least the crack spread is dropping. Oh well. Look at the CRB index, its soaring. Stagflation is here.

[saku39]

I believe that stocks going up is due to the interest rate cuts the Fed has instituted in the past few months.

It is temporary solution to the problems in the market.

Interest rates are the "price of money." When money is cheap, there increased chance for mal-investment. The system is flawed and the rate cuts are just a band aid on a larger wound.

[Bradley in DC]

When it takes two dollars to buy a loaf of bread that used to cost 1 dollar- thats inflation and it is bad.

Not exactly, no. Inflation was the artificial credit creation of the Fed increasing the money supply that was not a response to increased savings. The price increase in consumer goods is a result of that inflation.

[micahnelson]

Not exactly, no. Inflation was the artificial credit creation of the Fed increasing the money supply that was not a response to increased savings. The price increase in consumer goods is a result of that inflation.

Oh I understand that... trust me. Three books changed my life.

The Bible, 1984, and the Creature from Jekyll Island.

Im just curious why no one is willing to admit that stock prices going up may be the result of the devaluing currency and instead insist its because of our "great economy", especially when you look at all the other economics factors that point to a declining dollar.

[Tim724]

I don't fully understand why Wall Street doesn't seem to see any downside to inflationary monetary policy.

However, I do know that Zimbabwe's stock market was going way up alongside their infamous hyper-inflation.

[saku39]

Im just curious why no one is willing to admit that stock prices going up may be the result of the devaluing currency and instead insist its because of our "great economy", especially when you look at all the other economics factors that point to a declining dollar.

Most hardcore wall street types know about this and factor it in. They can usually beat inflation with real profits. But the brokers that sell stocks to the general public never mention inflation though.

They will brag to their clients that their managed portfolio gain 8% over 2 years forgetting that inflation eats away at the increases essentially turning the profits to zero.

[saku39]

I don't fully understand why Wall Street doesn't seem to see any downside to inflationary monetary policy.

However, I do know that Zimbabwe's stock market was going way up alongside their infamous hyper-inflation.

Because the current system benefits them the most.

The new money injected into the system is received by the large banks first and then trickles down to the bottom.

Since the Wall Street types get the money first, the money still retains it's original value and purchasing power. But by the time people like the middle class or poor people get it, the money has lost some of it's value.

It also benefits them because if there's ever a problem, the Fed bails them out. The problem is, little by little, it screws over the rest of us.

[Bradley in DC]

Im just curious why no one is willing to admit that stock prices going up may be the result of the devaluing currency and instead insist its because of our "great economy", especially when you look at all the other economics factors that point to a declining dollar.

I am not arguing this position, but some make a distinction between "investment" spending and consumer spending. And yes, of course, you have it right.

[micahnelson]

And yes, of course, you have it right.

I completely agree with this statement.

[MsDoodahs]

Because the current system benefits them the most.

The new money injected into the system is received by the large banks first and then trickles down to the bottom.

Since the Wall Street types get the money first, the money still retains it's original value and purchasing power. But by the time people like the middle class or poor people get it, the money has lost some of it's value.

It also benefits them because if there's ever a problem, the Fed bails them out. The problem is, little by little, it screws over the rest of us.

Q.F.T.

:D