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by roenxi
1798 days ago
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> I would argue that large parts of the financial system actually failed 13 years ago. Bailouts restored them. There are substantial movements in the market that only make sense if the motivation is a straightforward government intervention. It is a mockery of everything the financial system strives to be when we get hit by the worst crisis in around 30-50 years and the response of the stock market is leaping like a well trained puppy to breathtaking all time highs. The US financial system is starting to flirt with central planning. I'm keeping a weather eye out for the day that the majority of US spending is done by the government. |
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This is a somewhat "loaded" statement, with assumptions about what the financial system strives to be. Some of that load is, IMO, monetarism. Some of it is adjacent to monetarism.
Though I suspect we have different views on what we're seeing, I reckon we're seeing a lot of the same things.
It's always easier to explain the past, so this is what it is. That said, I reckon these are a few factors that went into asset value appreciation during the crisis:
1 - As you say, a (correct) market prediction of loose fiscal and monetary policies.
2 - A (probably correct) prediction of long term, near-zero interest rates... regardless of inflation. IE, markets directly predict an end to CB monetarism, as it has been practiced for decades.
3 - (more speculative) ...Lockdowns and such accelerate digitisation and its associated centralisation. E Commerce over physical retail. Netflix over theatres. Etrc. Empirically, digital goods, especially in the hands of very large companies, produce much higher profit margins and/or growth rates. This translates directly into market cap. IE, if $10bn of retails spending/revenue moves from traditional retail to amazon, this is a (substantially) plus-sum game in terms of total market cap.
In any case, this isn't unprecedented. Wars & post war demilitarization have played similar, paradoxical roles before. Conclusions in the past have also been similar... that public spending and the health of the private economy are often complimentary, rather than competitive.
Moving forward, whether or not a majority of US spending is done by the government, all USD spending originates in government money printing. That much is no longer deniable. A view of the world where money originates in private markets, funding government spending via taxation is no longer viable.
IMO, a compromise that doesn't involve central planning is redistribution, either directly or via taxation. There just seems to be more reluctance around the latter than the former, once you get into specific policy cases.