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Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring

Posted By admin On January 29, 2013 @ 6:21 am In Featured Stories,Tile | Comments Disabled

Michael Snyder
Economic Collapse [1]
Jan 29, 2013

You can thank the reckless money printing that the Federal Reserve has been doing for the incredible bull market that we have seen in recent months.  When the Federal Reserve does more “quantitative easing”, it is the financial markets that benefit the most.  The Dow and the S&P 500 have both hit levels not seen since 2007 this month, and many analysts are projecting that 2013 will be a banner year for stocks.  But is a rising stock market really a sign that the overall economy is rapidly improving as many are suggesting?  Of course not.  Just because the Federal Reserve has inflated another false stock market bubble with a bunch of funny money does not mean that the U.S. economy is in great shape.  In fact, the truth is that things just keep getting worse [2] for average Americans.  The percentage of working age Americans with a job has fallen from 60.6% to 58.6% [3] while Barack Obama has been president, 40 percent [4] of all American workers are making $20,000 a year or less, median household income has declined for four years in a row [5], and poverty in the United States is absolutely exploding [6].  So quantitative easing has definitely not made things better for the middle class.  But all of the money printing that the Fed has been doing has worked out wonderfully for Wall Street.  Profits are soaring at Goldman Sachs [7] and luxury estates in the Hamptons [8] are selling briskly.  Unfortunately, this is how things work in America these days.  Our “leaders” seem far more concerned with the welfare of Wall Street than they do about the welfare of the American people.  When things get rocky, their first priority always seems to be to do whatever it takes to pump up the financial markets.

When QE3 was announced, it was heralded as the grand solution to all of our economic problems.  But the truth is that those running things knew exactly what it would do.  Quantitative easing always pumps up the financial markets, and that overwhelmingly benefits those that are wealthy.  In fact, a while back a CNBC article [9] discussed a very interesting study from the Bank of England which showed a clear correlation between quantitative easing and rising stock prices…

It said that the Bank of England’s policies of quantitative easing – similar to the Fed’s – had benefited mainly the wealthy.

Specifically, it said that its QE program had boosted the value of stocks and bonds by 26 percent, or about $970 billion. It said that about 40 percent of those gains went to the richest 5 percent of British households.

Many said the BOE’s easing added to social anger and unrest. Dhaval Joshi, of BCA Research wrote that  “QE cash ends up overwhelmingly in profits, thereby exacerbating already extreme income inequality and the consequent social tensions that arise from it.”

So should we be surprised that stocks are now the highest that they have been in more than 5 years?

Of course not.

And who benefits from this?

The wealthy do.  In fact, 82 percent [9] of all individually held stocks are owned by the wealthiest 5 percent of all Americans.

Unfortunately, all of this reckless money printing has a very negative impact on all the rest of us.  When the Fed floods the financial system with money, that causes inflation.  That means that the cost of living has gone up even though your paycheck may not have.

If you go to the supermarket frequently, you know exactly what I am talking about.  The new “sale prices” are what the old “regular prices” used to be.  They keep shrinking many of the package sizes in order to try to hide the inflation, but I don’t think many people are fooled.  Our food dollars are not stretching nearly as far as they used to, and we can blame the Federal Reserve for that.

For much more on rising prices in America, please see this article: “Somebody Should Start The ‘Stuff Costs Too Much’ Party [10]“.

Sadly, this is what the Federal Reserve does.  The system was designed to create inflation [11].  Before the Federal Reserve came into existence, the United States never had an ongoing problem with inflation.  But since the Fed was created, the United States has endured constant inflation.  In fact, we have come to accept it as “normal”.  Just check out the amazing chart in the video posted below [12]

The chart in that video kind of reminds me of a chart that I shared in aprevious article [13]

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring Hyperinflation Weimar Republic 425x531 [14]

Not that I expect the United States to enter a period of hyperinflation in the near future.

Actually, despite all of the reckless money printing that the Fed has been doing, I expect that at some point we are going to see another wave of panic hit the financial markets like we saw back in 2008.  The false stock market bubble will burst, major banks will fail and the financial system will implode.  It could unfold something like this…

1 – A derivatives panic [15] hits the “too big to fail” banks.

2 – Financial markets all over the globe crash.

3 – The credit markets freeze up.

4 – Economic activity in the United States starts to grind to a halt.

5 – Unemployment rises above 20 percent and mortgage defaults soar to unprecedented levels.

6 – Tax revenues fall dramatically and austerity measures are implemented by the federal government, state governments and local governments.

7 – The rest of the globe rapidly loses confidence in the U.S. financial system and begins to dump U.S. debt and U.S. dollars.

I write about derivatives [16] a lot, because they are one of the greatest threats that the global financial system is facing.  In fact, right now a derivatives scandal is threatening to take down the oldest bank in the world [17]

Banca Monte dei Paschi di Siena, the world’s oldest bank, was making loans when Michelangelo and Leonardo da Vinci were young men and before Columbus sailed to the New World. The bank survived the Italian War, which saw Siena’s surrender to Spain in 1555, the Napoleonic campaign, the Second World War and assorted bouts of plague and poverty.

But MPS may not survive the twin threats of a gruesomely expensive takeover gone bad and a derivatives scandal that may result in legal action against the bank’s former executives. After five centuries of independence, MPS may have to be nationalized as its losses soar and its value sinks.

So when you hear the word “derivatives” in the news, pay close attention.  The bankers have turned our financial system into a giant casino, and at some point the entire house of cards is going to come crashing down.

In response to the coming financial crisis, I believe that our “leaders” will eventually resort to money printing unlike anything we have ever seen before in a desperate attempt to resuscitate the system.  When that happens, I believe that we will see the kind of rampant inflation that so many people have been warning about.

So what do you think about all of this?

Do you believe that Federal Reserve money printing is the real reason why the stock market is soaring?

Please feel free to post a comment with your thoughts below…

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URL to article: http://www.prisonplanet.com/federal-reserve-money-printing-is-the-real-reason-why-the-stock-market-is-soaring.html

URLs in this post:

[1] Economic Collapse: http://theeconomiccollapseblog.com/archives/federal-reserve-money-printing-is-the-real-reason-why-the-stock-market-is-soaring

[2] keep getting worse: http://theeconomiccollapseblog.com/archives/37-statistics-which-show-how-four-years-of-obama-have-wrecked-the-u-s-economy

[3] from 60.6% to 58.6%: http://research.stlouisfed.org/fred2/data/EMRATIO.txt

[4] 40 percent: http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2011

[5] four years in a row: http://theeconomiccollapseblog.com/archives/things-are-getting-worse-median-household-income-has-fallen-4-years-in-a-row

[6] absolutely exploding: http://theeconomiccollapseblog.com/archives/the-u-s-has-an-even-larger-gap-between-the-rich-and-the-poor-than-downton-abbey-does

[7] Goldman Sachs: http://theeconomiccollapseblog.com/archives/goldman-sachs-made-400-million-betting-on-food-prices-in-2012-while-hundreds-of-millions-starved

[8] in the Hamptons: http://www.cnbc.com/id/100405283

[9] CNBC article: http://www.cnbc.com/id/49031991

[10] Somebody Should Start The ‘Stuff Costs Too Much’ Party: http://theeconomiccollapseblog.com/archives/somebody-should-start-the-stuff-costs-too-much-party

[11] was designed to create inflation: http://theeconomiccollapseblog.com/archives/what-if-we-adopted-a-system-where-the-banks-did-not-create-our-money

[12] in the video posted below: http://www.youtube.com/watch?v=cikT5DdvGj4&feature=player_embedded

[13] previous article: http://theeconomiccollapseblog.com/archives/quantitative-easing-did-not-work-for-the-weimar-republic-either

[14] Image: http://www.prisonplanet.com/?attachment_id=5180

[15] derivatives panic: http://theeconomiccollapseblog.com/archives/the-coming-derivatives-panic-that-will-destroy-global-financial-markets

[16] derivatives: http://theeconomiccollapseblog.com/archives/tag/derivatives

[17] the oldest bank in the world: http://www.theglobeandmail.com/report-on-business/international-business/european-business/derivatives-may-be-undoing-of-the-worlds-oldest-bank/article7883921/?cmpid=rss1

[18] Is The Federal Reserve Out Of Control? Markets Across The Globe Brace For Impact As The Federal Reserve Powers Up The Printing Presses: http://www.prisonplanet.com/is-the-federal-reserve-out-of-control-markets-across-the-globe-brace-for-impact-as-the-federal-reserve-powers-up-the-printing-presses.html

[19] How In The World Did We Get To The Point Where The Federal Reserve Is Printing Money Out Of Thin Air Whenever It Wants?: http://www.prisonplanet.com/how-in-the-world-did-we-get-to-the-point-where-the-federal-reserve-is-printing-money-out-of-thin-air-whenever-it-wants.html

[20] RBS tells clients to prepare for ‘monster’ money-printing by the Federal Reserve: http://www.prisonplanet.com/rbs-tells-clients-to-prepare-for-monster-money-printing-by-the-federal-reserve.html

[21] China warns Federal Reserve over ‘printing money’: http://www.prisonplanet.com/china-warns-federal-reserve-over-printing-money.html

[22] The Federal Reserve Saves The Stock Market?: http://www.prisonplanet.com/the-federal-reserve-saves-the-stock-market.html

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