Free money: explaining 2008 U.S. stocks

Leaning on thin air?
Investing tip: put all of your money in the stock market the afternoon before a Federal Reserve announcement.  Take it all out the next afternoon.

 U.S. stocks have been in free fall this year, except on the days when the Federal Reserve announced it would be pumping extra cash into the banking system.  Every rate cut and liquidity facility has brought with it a great day on the trading market, and today is no exception.  An investor who times his market participation with Federal Reserve action has seen a phenomenal return in 2008.

Market strategists can be found all over mainstream news, having weird little greed orgasms every time the Federal Reserve “takes decisive action” to inject free money into the market, but anyone with a compassionate perspective and a basic understanding of economics asks the question: What is the price of one good day on the stock exchange?

The exact answer to that question is slippery.  The what is simple: hyperinflation and stagflation.  Who is affected? Everyone, but inflation is regressive, and will affect the middle class much more, as their wages will be unable to keep up with rising prices across the market.  Much of the nation’s capital will be invested in more lucrative, less expensive ventures overseas, so employment will be difficult to find in the U.S.  It is difficult to say when this will happen, but it is an inevitable law of money.  Nothing is free.  Only productive labor can give value to currency, so the Federal Reserve’s “free money” stock jumps are worthless.  Market strategists do not see hyperinflation coming, just like they did not see the depth of the subprime mortgage mess (they still don’t see that).  By the end of the summer, however, they will realize the price of a few days of good trading–a price paid by the extreme efforts the American middle class will have to exert to sustain their families, most of whom do not care about artificially inflated stock prices.

The Federal Reserve is not saving the economy.  It is exploiting the middle class to conserve malinvested wealth, and it is delaying and harshening an unavoidable market correction.


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