The Corruption of Easy Money
From Jeffery P. Snider, The Greater the Stock Bubble, The Less Monetary Theory Holds: Suddenly in January 2013, as the Fed's UST buying commenced to full strength, the amount of margin as well as the deterioration in net worth shifted violently "in favor" of stocks. I think the leverage flowing into stocks is proportionally more related to corporate "investment."
Why are stock investors so impacted by monetary influence where in exactly the way monetary theory posits, yet real economy agents are so clearly unaffected? Aside from some low-paying service jobs, the concentration of asset inflation did very little toward the mainstream idea of "aggregate demand."
The answer lies in monetarism not being a flow of "money" and funds but rather a corruption of expectations, and thus activity. The idea of "easy money" now spans not just some marginal speculators, but rather it has taken hold of everyone from the should-be-conservative retirees, to corporate boardrooms looking to get paid as much as possible before reality closes in once more and the bottom falls out. Thus (the) attendant flow, goes only in that direction. In other words, instead of enhancing marginal economic activity it directly suffocates it.
You used to have to work for money, now "everyone" knows your money should work for you. Should we be surprised that the economy, at the margins, reflects in full almost exactly that?
The Nattering One muses... You can pay me now, or you can pay me later. With easy money, the corruption or perversion of the flow towards yield chasing is sacrificing capital investment in the future for the financial engineering of profits today.
Why are stock investors so impacted by monetary influence where in exactly the way monetary theory posits, yet real economy agents are so clearly unaffected? Aside from some low-paying service jobs, the concentration of asset inflation did very little toward the mainstream idea of "aggregate demand."
The answer lies in monetarism not being a flow of "money" and funds but rather a corruption of expectations, and thus activity. The idea of "easy money" now spans not just some marginal speculators, but rather it has taken hold of everyone from the should-be-conservative retirees, to corporate boardrooms looking to get paid as much as possible before reality closes in once more and the bottom falls out. Thus (the) attendant flow, goes only in that direction. In other words, instead of enhancing marginal economic activity it directly suffocates it.
You used to have to work for money, now "everyone" knows your money should work for you. Should we be surprised that the economy, at the margins, reflects in full almost exactly that?
The Nattering One muses... You can pay me now, or you can pay me later. With easy money, the corruption or perversion of the flow towards yield chasing is sacrificing capital investment in the future for the financial engineering of profits today.
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