Is it time to throw fundamentals out the window?
As we went through the Sept 21st Fed minutes in yesterday’s Member chat we read some things that were AWFUL about the economy. I went through my usual exercise of parsing out the minutes and making comments for Members and it’s been a long time since I had to use red highlights that often! Still the market rallied, ostensibly on the premise that the economy is SO BAD, that the Fed will have no choice but to flood the economy with newly printed Dollars so that a rising tide of currency will lift all asset ships.
The boy from Zimbabwe on the right is a multi-Trillionaire and those Trillions should be just enough to buy him a loaf of bread if he hurries to the store before they change the prices this morning. This is what is happening to our own economy, only on a smaller scale (so far). Our government, like Zimbabwe, has gotten into so much debt that they can never hope to repay it but new bills keep coming in every day so – What is a government to do?
Why print more money of course!
Now, when a bill comes in, they just crank up the presses and drop the fresh bills in an envelope. Unfortunately, after a while, the people who provide goods and services you and your government pay for begin to catch on that those bills are suddenly very easy to come by and they begin to demand more and more of them as exchange. It’s a little hard to picture unless you run it into the abstract but think of it like an auction, where 5 people have $5 each to bid on 5 items. Well those items (commodities) will get somewhere between $0 and $5 from the bidders, right? Now, what happens if one of the bidders prints himself up $45 additional dollars? Now he can bid $10 on each item and the other bidders will get nothing.
That’s what the top 1% are doing with commodities and other assets right now. The assets are the same assets they were last year and the year before that. There has been very little variation between supply and demand and demand has probably gone down a bit during the recession but that doesn’t matter as 1% of the people have MUCH more money than the other 99% and they…
