Economy
Related: About this forumSo, the current attack of the market being up is that "The Fed is printing money ... giving
$85billion a month to the corporations." (via pumping money into the stock market).
Does this mean that all these newly minted "millionaires" and "billionaires", stockholders and investors, allegedly the "job creators", are there (or will be there) solely due to ...
the Government $$$, the Government Teat?
MannyGoldstein
(34,589 posts)I wonder what Krugman has to say about this?
Warpy
(110,903 posts)to billionaires because of unemployment, low wages, and the skewed tax code. All that extra cash has got to go somewhere, so it's been flooding into stocks and commodities.
There are only so many gold bathrooms you can get to before you croak.
If that printed money had been circulated at the bottom in jobs repairing and renewing infrastructure, you'd see a rapidly recovering economy and a stalled stock market between 9000-11,000.
Arctic Dave
(13,812 posts)Corporations have taken the cheap money and stuffed it into their coffers and are giving themselves massive bonuses with it.
zbdent
(35,392 posts)for their wealth ... that's what I thought ...
stevebreeze
(1,877 posts)And it does involve the fed. Quantitative easing is basically the fed buying up bonds to drive interest rate down, this has other effects. The first of course to drive down interest rates paid by the big banks, but it also keeps down return on investment on savings low. So low most normal types of savings return at rates lower then inflation, including treasury bonds. So big money is looking for other places with a better return. This put more money into the stock market, an supply and demand of course raises the prices of stocks.
Benton D Struckcheon
(2,347 posts)He divided the economy into three groups: government, companies, and consumers. In a downturn, the government runs a big deficit, and this feeds a surplus for companies and/or consumers. He said, and this is borne out by the facts if you look at the record, that in a downturn corporate profits will increase. This is what has happened. Of course as profits go up so does the stock market.
As the recovery continues, the government deficit decreases and corporate profit growth slows down too. That has been happening more recently. See below.
Corporate Profits, Year Over Year Percent Change, Since 1980:
Govt Deficits/Surpluses as Percent of GDP, Since 1980:
The last piece is consumer credit, which after a fall during the crisis, has begun to rise again:
The recovery in the growth of consumer credit post the crisis has kept corporate profit growth steady as the government deficit shrinks.
The government deficit is still big as a percent of GDP, so profits should continue to be healthy for a while. As the recovery progresses and the deficit continues to shrink profit growth will slow and move to the zero line on a year over year basis since there's only so much credit consumers can take out. In other words the pace of shrinkage in the Federal deficit will overwhelm consumer credit growth at some point.