I was watching Peter Schiff on Fast Money about 5 minutes ago and the commentators were saying that the Federal Reserve’s intervention in the economy has helped pull us out of the recession. They were pointing to increasing trends in the Dow Jones and S&P 500 as signs of a recovery. Peter Schiff, of course, was arguing that the market will turn down in the near future. What is going on here? Has the Fed’s intervention pumped up the stock markets? Where would be if the Fed did not intervene? Is the market really experiencing a recovery?
People are still losing their jobs, and the dollar is plunging on foreign exchange markets.
Big deal if the stock market goes up. It’s all manipulated anyway. IMO, it just means people are fleeing cash.
When the economy begins producing private sector jobs (which it hasn’t done in 10 years) then you can say a recovery is in progress. Right now, everyone is still contracting. The stock market is for suckers IMO.
It’s impossible to flee from cash on aggregate. Money is always in possesion. [:P]
It depends on what you mean by recovery. I think people on this forum have a very high standard for a recovery - not wrong, just a high standard. In terms of what most people will look for as far as a “recovery,” which is really more of an antithetical definition than anything, is a combination of decent employment and GDP growth with a kind of environment that “feels” better and more rewarding, I think people will see the economy in recovery for a short time but then see the economy fall backwards as the Fed is forced to raise interest rates while inflation pressures grow and unemployment remains stubbornly high.
Though the pundits will say that there is a recovery or we’re away from the edge of the cliff, it probably won’t feel like it for quite a long time.
What is really happening is that the money supply is inflating.
Suppose that the stock market goes up 20% but true inflation is 30%. Then, they’ll say “Hooray! Economic recovery!”, but it’s merely inflation.
Money supply inflation is confused with economic growth.
We must distinguish between a nominal recovery and a real recovery. The Fed’s money printing activities may certainly spur more consumption and “demand” leading to increased corporate earnings, but it is an illusory growth from money supply inflation. Economic cheerleader’s will quickly point to anything that shows and uptick as recovery, when the fact remains we have only begun to unwind the credit bubble (Fed trying to reverse and prop up), unemployment is still high and gross domestic private investment is still way down.