The Market’s Going To Go Up!
Your 401Ks will increase in … numbers.
But the value will decrease. By maybe 40%.
“$10T Money Print! Fed’s New Plan Will Dwarf Bernanke Era“
If true, this is what also occurred in Oct 2023; the Fed dumped $10T into the market and stock prices went on a 14-month tear from then until mid-Feb of this year. Now they’re talking of doing it again?
Do you feel richer from the Fed doing that the first time?
What this actually meant of course, is that the value of the dollar decreased so it took more dollars to purchase something of constant value.
Gold more or less holds its value – look at gold prices over the same period.
With the market turn-down since mid-Feb, the money people begin to get worried – their worth is decreasing.
How to fix that? Dump more money into the market; get those prices back on an upswing. Everyone looks at the “value” of their savings accounts – mostly IRAs and similar – and think “I’m getting rich; isn’t life grand?” when actually, the purchasing power of that $1million dollars in your savings is not what one thinks of when becoming a “millionaire” (IIRC, a millionaire is now defined as someone having an income of $1m/yr rather than a worth of $1m. Like a lot of things, the definition had to change to hide reality.)
Certain things will gain in worth; most will decrease. Just because the dollar amount on your savings goes up doesn’t mean your purchasing ability has gone up as well; likely, it’s going down. There’s government inflation numbers … and the prices you have to pay. Which do you believe?
(I personally have two Federal items in my life – income and outgo – both adjusted to cost-of-living.
Funny how the COL for money coming in is less than the COL for the money going out)
I don’t have recommendations. As they say; “The best time to prepare was 10 years ago, the next best time is now“. It may already be too late to gain a “bug-out” location; locals most anywhere one goes – especially rural areas – are getting resentful of newcomers. Mortgage rates are high, likely going higher. Doesn’t matter though, mortgages will be harder to qualify for regardless of the interest. Guns and ammo are good; not as important as many think though. What else do you need for when you can’t get it? Electricity? Water? Food? Waste disposal?
I suspect the market over all will continue down, perhaps another 20%. I suspect a flood of “funny-money” into the market in an attempt to keep prices up.
I suspect a major war …
It wouldn’t surprise me to see an adjustment in our currency – effectively turning the present $100 bill into the “new” 90¢ … as soon as they can figure a way to do so without bringing out the tar, feathers, and pitchforks.
When? It could be the process has already started; it could be it takes a few months. I’m doubtful we have years.
Since they just print “money” as needed, one might wonder why we pay taxes. Or could an “elimination” of taxes be the way to introduce/force this new currency?
The Trump administration – while far superior to the alternative – is not going to be hoards of men on white horses come to save the day. More likely, just one gang coming in to take the place of the old gang. “Meet the new boss; same as the old boss“.
Has this administration really done anything more than blow pretty smoke? A few hundred undesirables kicked out, a few million/billion dollars supposedly saved? Fluffy news stories. Did your taxes go down with all those savings? All the investigations and revelations of criminality and corruption? Anyone high up arrested and convicted yet? Anyone else suspect these district judges are simply a distraction or an excuse? They don’t have the authority to tell the Executive branch what to do; they have no national authority in any case. Why aren’t they simply being ignored?
Once the baby-boomers are gone, all memory of the way it once was will be gone with them. It was a privilege worthy of thanking God for having been a young adult during the time of the American empire’s greatest days.
Shouldn’t read the news just before I prepare a post …
Of course, I could be fully full of it.
You aren’t full of it. Unless I am too. I’m buying a new, longer shovel tomorrow to increase the depth of our bolt hole.
Here’s one for ya’: Bitcoin!!
OK. If it wasn’t obvious, that Bitcoin comment was a joke. I have a small pittance in a Bitcoin ETF (GBTC), and while it has done well for me, I don’t pretend that I’ll be able to do any more than just Supersize my fries the next time I pass through McDonalds.
But before I get to something more substantial (I hope), a YUUUGE caveat: My formal training in economics began when I took Freshman Econ 101 and 102 something like a jillion years ago. Since then, I’ve tried to read a couple of books on monetary theory here and there, but found it a difficult and very dry topic, and never quite finished. The exception was The Creature From Jekyll Island, which I highly recommend.
But outside of those 2 courses, I didn’t study Economics in college, but instead I studied Physics. My Freshman Physics professor was a brilliant guy, Albert Allen Bartlett. Being 18 and thinking of ourselves as really, really smart, most of we Physics majors found it the height of humor to call him “A²” (behind his back, of course). Anyway, A² had worked on the Manhattan Project and in the world of Physics, we were mere bugs. He devoted one of his instructional classes each year to a favorite topic of his: The Greatest Shortcoming of the Human Race is our Inability to Understand the Exponential Function. I hate recommending hour-long videos….very few will give up that amount of time….but I do recommend it. [On later reflection, while I agree with Bartlett’s point about the exponential function, I also think he was a bit of a Malthusian nut. Enforcing a population and/or energy control scheme drifts into Stalinism or Maoism, and none of that is good. But I digress.]
I was reminded of that lecture on the exponential function when, after the Financial Crisis of 2008, I started to try to understand what was happening with the markets and the Dollar. That was when I first picked up Jekyll Island.
But today, you say that we’re off on a new round of printing money. Hah! That’s nothing new. I’ve linked below an image of what the Federal Reserve defines as our “Monetary Base“. If you read the fine print below the chart, you’ll see that the Fed’s definition is “The monetary base equals currency in circulation plus reserve balances.” Is that important? I dunno. Maybe it is. But what I do know is that the Fed also puts out information on M1, M2, and the Velocity of M2 Money Stock. Those are prolly important too, but as I look at all that I’m already kinda deep in the weeds. No matter what it is that they’re trying to show me, I still keep seeing that exponential function that A² spoke of. I don’t like it. Never have.
If you go back to that chart of the Monetary Base, you can see what they did in Sept. 2008. Back then, we called it “QE”–Quantitave Easing. That didn’t do enough to stabilize the markets, so in Sept 2009, they gave us more of the same with “QE2“. That too didn’t do enough, and in Nov 2010, they had a third round, but by that point they were done giving us spiffy names. Since then, it has been Off-to-the-Races. Dec 2012. Right before Covid at Jan 2020 and then again in Aug 2020. I won’t be surprised if, as you say, that to ward off the impacts of the tariff and trade war-induced disruptions in our markets, that the Fed will print more. The exponential chart will eventually go vertical.
In short, the Federal Reserve will print money with abandon any time that they face a crisis. And you know what? It works. When Joe Sixpack sees huge losses in the value of his home and his 401k….the two areas where most of us keep our wealth….he panics and wants somebody to do something about it. The Fed responds by printing more money, and Voila!! In a matter of a couple of months, Joe is made whole again. [He’s not, of course. But he feels as though he has. And feelings are what matters here.]
This is just my largely-uneducated theory, but I think that we’re watching the failure of Fractional Reserve banking. [BTW….do you know how much reserves the Fed requires banks to keep? Mmmyeah….zero. It’s been that way for 5 years.] Pick whatever chart you want….Monetary Base, M1, M2, whatever….the Fed will print until that chart goes vertical and then the whole system will collapse, and something else will have to take it’s place. I’m betting that it’ll be Gold, but there are problems with that too. If it does turn out to be Gold, watch out for India: Eleven percent of the world’s physical gold is owned by……wait for it…….Indian housewives.
You mention the “purchasing power of a million bucks”. Do you know what percentage of Americans have 7 digits in their retirement accounts? This article says 4.7%. I say: If you’re part of the 95% who have less than that, then “Don’t worry. Be happy.” If the crash happens, you, like everyone else, will find a way to get by.
Can’t say I disagree with you. One way to evaluate an exponential function is to use a log scale to examine the data … and see where the result is non-linear.
“In short, the Federal Reserve will print money with abandon any time that they face a crisis. And you know what? It works.”
Until it doesn’t and I think we’re getting close to that point … which is one reason I suspect a major change in currency coming. A nice, nasty war gives the govt an excuse for which they can deflect blame; harder to do if they simply pull an FDR stunt. As the Fed is essentially the world bank, such an action would result in major global-wide disruptions … but broke is broke and the US is broke.
It wasn’t the poor people throwing themselves off buildings in the crash leading to the “Great Depression”; (it wasn’t the proles affected by Big Brother in “1984” either)
Most people’s worth is in their homes, not a 401 – can’t chop off a cupboard from the kitchen to pay for groceries though.
“If the crash happens, you, like everyone else, will find a way to get by”
You’ll get by better if your “worth” is in something physically real rather than ink on an account statement. I tend to favor pre-1964 US silver dimes and quarters – so called “junk” silver. Getting pretty expensive now though – but I suspect someday soon I might wish I had bought more at that cheap price of $30/oz
I tend to favor pre-1964 US silver dimes and quarters – so called “junk” silver.
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Same here. Easily spendable in the future. Got about $12k and wish I had double, but my usual source has been kinda dry lately.
The debasing of currency has been going on for millennium, to the benefit of governments, not the people.
BASIC ECONOMIS by Thomas Sowell is the best read about economics and the economy, on the planet. Not dry at all. That man is a national treasure.