Comstock Partners, Inc.December 03, 2010
Hi there from Ireland.
Hi there from Ireland. I've been reading your blog every fri morning GMT and before when it was daily for a long time now and in my opinion it is one of the best things on the Internet. I've emailed you about this before.
I've one comment on your Fri Dec 3 piece when you say "However if you believe, as we do, that the start date of our crisis was 2000 and not 2008, you can see that we postponed the inevitable for 8 years while we had a Fed-sponsored housing and stock market bubble that should have been addressed much earlier. "
Alan Greenspan's slashing of interest rates after the 2001 tech crash was a stimulus and it did save the numbers in the short run. In the long run the waste this money caused by directing resources into real estate and the financing of such became clear. TARP & QE was stimulus 2 and again this is saving the numbers in the short run. Naturally the money can't create a stimulus via real estate with the oversupply of housing from the stimulus 1 so it's been going into stocks and bonds from what I can tell. Stocks are going up due to QE2 and the Feds determination to stimulate via trickle down economics via those picking up a nominal return on inflated stock prices.
However, surely in real terms stocks are not going up? I do not doubt the cycle of deflation but in areas where the fed's money flow there will be inflation until the damage caused by the destroying the function of the stock market as an information system reduces the underlying real wealth in the economy to such a degree that the inflated stock prices finally have to fall. Until that happens, which could be a number of years, is it not possible that stock prices can be kept up by Fed activity?