Only reason market is levitating at heights before the crash in 1929 is..........ARTIFICIAL low interest rates. Federals have the tiger by the tail. If they bring rates back up to level based on real inflation, the gov’t can not afford to pay the interest on $23 Trillion debt. And it will crash the market.
Even more scary is level of debt not just by the US gov’t, but add to that student debt, credit card debt, mortgage debt (which is high due to inflated values of hard assets), and debt all over the world.
High debt requires that economies operate at high levels. If any hiccup occurs the debt kills the debt holders.
First the crash os ‘29 was caused by insane margin buying. Back then there were no restrictions and investors could margin 100% of their equities.
As for our debt? AS an old ex banker, the thinking went like this.
If you owe the bank a million dollars and can’t pay it back, you are in trouble.
But if you owe the bank a trillion dollars and can’t pay it back the bank is in trouble.
In today’s world we are the borrowers and the world (China, Japan, etc) is the bank.
The bond market determines the interest rate that Treasury debt has to pay on its paper. The current 10 yr Treasury yield is 1.56%
The only rate that the Fed can set is the Discount Rate, the rate commercial banks have to pay to borrow money directly from the Fed. The current discount rate is 2.75%, at the lower end of the sweet spot that the Fed likes it in.