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Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is Soaring
TEC ^ | 01/30/2013 | Michael Snyder

Posted on 01/30/2013 2:17:26 PM PST by SeekAndFind

Federal Reserve Money Printing Is The Real Reason Why The Stock Market Is SoaringYou 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 for average Americans. The percentage of working age Americans with a job has fallen from 60.6% to 58.6% while Barack Obama has been president, 40 percent of all American workers are making $20,000 a year or less, median household income has declined for four years in a row, and poverty in the United States is absolutely exploding. 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 and luxury estates in the Hamptons 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 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 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".

Sadly, this is what the Federal Reserve does. The system was designed to create inflation. 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...

The chart in that video kind of reminds me of a chart that I shared in a previous article...

Hyperinflation Weimar Republic

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 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 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...

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?

TOPICS: Business/Economy; Government; Society
KEYWORDS: fed; federalreserve; stockmarket

1 posted on 01/30/2013 2:17:36 PM PST by SeekAndFind
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To: SeekAndFind

Can’t argue with a single point.

Greed is a dreadful sin.

2 posted on 01/30/2013 2:21:54 PM PST by WCH
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To: SeekAndFind

All they have to do is keep the money creation going at a rate that allows a normally declining stock market to slowly grow and they will be able to declare victory every day....

What does the stock market look like over the last 10 years if it is adjusted for inflation?

I’ll bet the trend for the last 5 years is down, down, down....

3 posted on 01/30/2013 2:29:56 PM PST by GraceG
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To: SeekAndFind

I learned a LOT from my Depression-Era Grandparents. There were no jobs, and my Grandpa had a wife, a new baby (my Dad) and his FIL to support at the time.

There were no ‘jobs’ so Grandpa did ANYTHING needed to make a few bucks. He swept streets, delivered milk, baked bread, mucked out animal stalls, had a paper route, collected bottles, tin cans and newspapers to cash in...and he WORKED through the ENTIRE Depression.

And when things turned around, he had cash in hand to buy up houses that were defaulted upon, including their contents. Many of those ‘antiques’ live in my house, today. :)

I am so HAPPY to have that man’s blood flowing through my veins. I’m gonna be just fine. ;)

4 posted on 01/30/2013 2:38:57 PM PST by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set...)
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FWIW - that above rant is for when this House of Cards comes crashing down upon us!

5 posted on 01/30/2013 2:40:33 PM PST by Diana in Wisconsin (I don't have 'Hobbies.' I'm developing a robust Post-Apocalyptic skill set...)
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To: SeekAndFind

the politicians created the housing crisis and now they are creating a currency crisis AND a stock market crisis ... which will hit first?

just try to be diversified and have something set aside in safe assets of your choice, just in case

someday maybe we can regain a reasonable facsimile to a constitutional government ... and at least get the govt to stop creating all these economy-destroying financial crises

6 posted on 01/30/2013 2:48:02 PM PST by faithhopecharity
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To: GraceG

Measure the stock market vs Gold and you will see which way the stock market has gone.

I disagree that the world will flee from the dollar in a panic, that would destroy the wealthy and the wealthy run the game.

7 posted on 01/30/2013 2:50:47 PM PST by Lets Roll NOW (A baby isn't a punishment, Obama is)
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To: SeekAndFind
along with the price of gas... up $.14 in the last week here
8 posted on 01/30/2013 3:32:59 PM PST by Chode (Stand UP and Be Counted, or line up and be numbered - *DTOM* -ww- NO Pity for the LAZY)
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To: SeekAndFind

The Fed and the inflation it is causing is the real reason for the rising stock market. Might want to ask Grandma about those meal stretching ideas that they used back in the late 40s and early 50s ..... dog food burgers, dog food meat loaf, spaghetti and dog food meat balls or for the uber middle class, Alpo beef tips and noodles.

9 posted on 01/30/2013 6:31:54 PM PST by RetiredTexasVet
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