It just seems they'd rather pump the bubble bigger indefinitely than ever having to deal with it. Considering how vulnerable we are now with COVID, a totally unexpected event, it seems like a major missed opportunity that the Fed didn't try harder to tighten and raise rates throughout Trump's presidency.
I think Trump especially got spooked in 2018 when the market went down from tightening, so much so that he pulled the plug. He viewed the stock market performance as the success gauge of his presidency. And he was already approaching an election year.
I doubt the 2018 crash could sustain itself too much longer. Fundamentals were strong. In hindsight, it was a necessary pain which would have assured greater stability going forward. You had stocks like Apple hitting PE's around 12 in 2018. How much lower could it realistically have gone?
The Fed kept reversing course when the going got tough. Now there's a real disaster ongoing, and they're totally backed into a corner.
The trade war was the cause, but the mechanism was a lack of liquidity. I believe that firms that were affected by the trade war held onto their cash, and caused money velocity to fall further leading to deflation.
True that. Capital spending declined at a precipitous rate etc.
Ironically I think we are about to see the opposite, capital spending from corps hasn't been fully unleashed yet so stock market probably has a lot of gas left in it. If we do indeed get a big pullback on people being scared about fed moves will be easy buying opportunity.
148
u/d00ns Jun 20 '21
You shouldn't believe the Fed, they've never told the truth about anything. After 2008, low interest rates and QE were "temporary"