December 27, 2007 at 9:41 PM #11342bubba99Participant
Before they stopped reporting it, the FED was creating about a Trillion dollars in new money each year. In 2007 they probably created about 1.3 trillion, and the pace is increasing.
The stock market has baffled me by going up while even a simple analysis tells us it should be going down – less buying power for most Americans due to HELOC’s disappearing, and returns on savings going down. But it goes up because all of that new money must find a place to go. The increase in the supply of money must cause inflation somewhere as people look for investments for the new dollars.
With T-Bill rates so low (less than inflation) the dollars are like cockroaches looking for a new home. The dot com bubble was brought to us by the same people as the housing bubble via bad advice from financial experts and rating agencies. Housing was super charged by the rapid reduction of interest rates causing the monthly payments on even overpriced houses to be more affordable.
So now with the FED lowering interest rates again, and creating dollars as fast as they can, where are they going to nest? The stock markets are near record highs even thought the country has probably been in a recession for some time. And although there is a lot of room to make money in the market on the way down, it may be as sticky as housing.
So I ask Piggingtonia, where is the FED going to create the next bubble. Techs were already done, housing is exploding, the broader market is way ahead of itself, what is the next bubble industry?
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