Central banking practices, questionable currency, and massive financial institution bailouts have come together to form a troubling trifecta. Recently, we discussed how the Federal Reserve’s method of extensive money creation lifts financial assets—primarily owned by the affluent—upon a vast foundation of debt.
The public has been aware for some time that the Federal Reserve conjures money into existence and then lends it to the Treasury. This concept has been widely accepted as a fundamental aspect of monetary policy. Lowering interest rates is intended to foster demand and stimulate economic growth; however, it predominantly serves to inflate asset prices.
If you were under the impression that the stock market remains a stronghold of unfettered capitalism, we must regretfully inform you otherwise. Central banks globally are generating money from nothing and utilizing it to purchase stocks.
“A cluster of central banking investors has become major players on world equity markets,” according to a recent report by the Official Monetary and Financial Institutions Forum (OMFIF), a research and advisory organization focused on central banking.
“The actions of central banks, aimed at stimulating economies—including quantitative easing—have intentionally pushed investors towards riskier assets, resulting in a significant increase in share prices since 2009.”
Why the Stock Market is Rising
“In the aftermath of the financial crisis, various forms of ‘state capitalism’ have emerged,” the report states. “Whether this trend is beneficial is open to debate, but its occurrence is undeniable.”
What exactly is happening?
For years, we have questioned how the stock market continues to ascend to such staggering heights. Surely, it isn’t propelled by genuine economic growth, nor does it anticipate significant future earnings increases?
Take a moment to observe the world around you—headlines, economic indicators, or even Federal Reserve minutes. The DOW is at 17,000, and the S&P 500 is at 2,000. The numbers seem disjointed.
On one hand, you have soaring asset prices and the wealth of the top 1% ballooning. On the other, decent-paying jobs are disappearing, while the middle class faces the tightening grip of debt, which stifles their potential.
It has become evident that central banks are directly engaging in stock markets, artificially inflating them to unprecedented levels. The repercussions of these actions are clear, especially in hindsight.
Plume Economics
“While most have anticipated this outcome,” explains GlobalResearch, “the recent stock market exuberance has largely been attributed to another irrational player—the corporate buyback phenomenon. However, as The Financial Times reports, our long-held suspicions have now been validated, given the overwhelming evidence of irrationality, declining volumes, and the diminishing legitimacy of central planners.”
“Central banks around the globe, including China, have decisively pivoted to investing in equities.” What implications does this hold?
This is the troubling reality we face—a world where the principle of earning a fair day’s wage has all but disappeared. In its place, we find distorted financial markets bolstered by fictitious money, supporting a global economy increasingly perched on the brink of instability.
Like many, you likely go to work each day to earn a living. You may cut back on expenses, save diligently, or work extended hours while facing unending pressure from clients. Meanwhile, digital currency floods the bond and stock markets, analogous to the pollution emitted by coal-fired power plants.
How this situation will unfold—and when—is uncertain. Nevertheless, we sense that an ominous storm is approaching, much like the effects of El Niño. Catastrophe and turmoil are an inevitable outcome of unchecked deceit.
Sincerely,
MN Gordon
for Economic Prism
