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The Connection Between the Fed and the Stock Market

By indigenous follow indigenous   2016 Feb 22, 5:38pm 8,512 views   42 comments   watch   nsfw   quote   share    


I have made this point in several venues and on the pages of the Lara-Murphy Report for years, but some people may be new to this perspective. In the chart above, we see that the “monetary base”–which measures the total amount of currency held by the public, plus the electronic reserves that banks have on deposit with the Fed–has moved in lockstep with the S&P500 index since 2009.

This correlation underscores our view that the alleged recovery in the US economy, and the surge in stock prices, is built on quicksand. You don’t foster prosperity by having the central bank create money “out of thin air” in order to buy government debt and mortgage-backed securities.

Some wags have looked at the above chart and said, “Ah, so you guys should be in favor of QE4, right?” No. Each round of asset purchases merely digs us into a deeper hole, and will make the eventual reversal that much more painful. At some point, world investors will stop viewing Treasuries and the USD as “safe havens” and then the Fed will truly be out of options. If the people in charge have common sense, they will stop before that point. Thus far, it seems that Janet Yellen has assumed the role of the central banker who takes the punch bowl away and ruins the party.

For more on this topic, read up on Austrian business cycle theory.

https://lara-murphy.com/connection-fed-stock-market/

3   Entitlemented   ignore (0)   2016 Feb 22, 8:39pm     ↓ dislike (0)   quote   flag        

Just a few more years of Nuvo Keynesian Malivestment are required........

4   indigenous   ignore (0)   2016 Feb 22, 8:56pm     ↓ dislike (1)   quote   flag        

How the fuck do you figure that is the "exact same data"?

5   indigenous   ignore (0)   2016 Feb 22, 9:29pm     ↓ dislike (2)   quote   flag        

No tard boy, the reason the correlation disappears is because the Fed started their meddling in 2008. That is the whole fucking point.

6   indigenous   ignore (0)   2016 Feb 22, 9:40pm     ↓ dislike (2)   quote   flag        

Ahh poor Wogster, he has had a rough day, first the a-hole Austrians beating up on him and now this...

8   tatupu70   ignore (0)   2016 Feb 23, 8:31am     ↓ dislike (0)   quote   flag        

Ironman says

tatupu70 says

lol--I see. I'll remember this post. The Fed wasn't meddling prior to 2008.

You do that, so all Patnet posters can continue to see how clueless you are:

-



-

Nope, the FED printing had no effect on the charts above...

So, to prove that the Fed wasn't meddling prior to 2008, you post a chart starting in... wait for it... 2008. Brilliant!!

Hater says

tatupu70 says

The Fed wasn't meddling prior to 2008.

Remember when we were told, in 2008, that if we (the feds not really US) didn't bail out the too big to fail, life as we know it would end and the world would fall into a great depression? Remember QE?

Why are you such an disingenuous prick?

I don't even know what your point is here. Yes, I remember that. How is that at all relevant? Nobody is denying that the Fed intervened. My point is that Indigenous claims the Fed is responsible for every problem in the country from 1913 til now. It's ironic that he now says that the Fed didn't meddle until 2008.

9   tatupu70   ignore (0)   2016 Feb 23, 8:37am     ↓ dislike (0)   quote   flag        

Ironman says

So, you think that chart I posted started in 2008??

You really are a special type of stupid!!

OK--sorry. You posted a graph that started at some point in 2007.

The Fed has been around for 112 years and you included ~1 year of that time to compare with.

Is that better?

10   mell   ignore (4)   2016 Feb 23, 8:42am     ↓ dislike (0)   quote   flag        

Funny how people still stubbornly trying to "prove" that the Fed is not one of the most influential players with regards to money and economic policies in the world. When the Fed farts the whole world listens - it's what you do when someone who has the power of the worlds reserve currency speaks. "Oh look, interest rates have dropped even more despite the Fed" - are you guys fucking kidding? The Fed did a token raise of 0.25% which is jack shit and now has stalled again, rates are effectively ZIRP and there is talk now around the world about NIRP. C'mon guys, seriously, just let it go. We all know that the Fed is not omnipotent, but it can meddle and control much longer than most people betting against it can stay solvent.

tatupu70 says

My point is that Indigenous claims the Fed is responsible for every problem in the country from 1913 til now. It's ironic that he now says that the Fed didn't meddle until 2008.

That may or may not be true and is a valid point. But it definitely has become a problem over the past 20 years and moreso now. People get ass-raped because they cannot save anymore unless they have the genius mind of the duck and know exactly what bond play to do, so they play the casino and housing market - what else is left?

11   indigenous   ignore (0)   2016 Feb 23, 9:04am     ↓ dislike (0)   quote   flag        

mell says

tatupu70 says

My point is that Indigenous claims the Fed is responsible for every problem in the country from 1913 til now. It's ironic that he now says that the Fed didn't meddle until 2008.

That may or may not be true and is a valid point. But it definitely has become a problem over the past 20 years and moreso now.

They also did this in the 1920s
Again when the a-hole LBJ forced Chairman Martin to print to pay for Vietnam and his Great Society bullshit.
Again with Greenspan and Bernanke.

IMO the key here is that by definition inflation requires an increase in he money supply and an increase in demand.
Right now we have a lull before the storm i.e. the demand is coming and inflation is coming. Not sure how that will play out as we now have a global economy that for the most part will be in deflation. But there will be inflation.

12   mell   ignore (4)   2016 Feb 23, 9:14am     ↓ dislike (0)   quote   flag        

indigenous says

They also did this in the 1920s

Again when the a-hole LBJ forced Chairman Martin to print to pay for Vietnam and his Great Society bullshit.

Again with Greenspan and Bernanke.

Maybe. I can't claim to know every detail about times long before I was born and that the Fed was responsible for all crisis that happened. But the point is moot anyways as it clearly has become a problem here and now. Most central banks have become a problem for their countries/unions and that is why there is more and more resistance against them.

indigenous says

IMO the key here is that by definition inflation requires an increase in he money supply and an increase in demand.

Right now we have a lull before the storm i.e. the demand is coming and inflation is coming. Not sure how that will play out as we now have a global economy that for the most part will be in deflation. But there will be inflation.

Agree, it's difficult to predict inflation in a globalized world but you can clearly see inflation has been happening in those goods and services that cannot be easily globalized such as housing, healthcare and education. I maintain my stance that overall we have been having stagflation for a while now.

13   indigenous   ignore (0)   2016 Feb 23, 9:42am     ↓ dislike (0)   quote   flag        

mell says

Maybe. I can't claim to know every detail about times long before I was born and that the Fed was responsible for all crisis that happened. But the point is moot anyways as it clearly has become a problem here and now. Most central banks have become a problem for their countries/unions and that is why there is more and more resistance against them.

It speaks to, we have seen this movie before.

mell says

Agree, it's difficult to predict inflation in a globalized world but you can clearly see inflation has been happening in those goods and services that cannot be easily globalized such as housing, healthcare and education.

Notice how much Federal gov't meddling there has been in those as well.

mell says

I maintain my stance that overall we have been having stagflation for a while now.

Yup the US exports inflation, I'm saying that the forces will increase greatly due to demographics. Think the 70s on steroids.

14   NoCoupForYou   ignore (5)   2016 Feb 23, 1:00pm     ↓ dislike (0)   quote   flag        

Yes, it totally sucks using the dollar!

When I moved here I only got 4300 to the $1.
Now I get 5700 to the $1.

The Fed is weakening the dollar! When I moved here, a euro got you almost another 40-50%. Today, it's only like 10% more than USD... The dollar is collapsing! Call Ron Paul!!! Creature from Jekyl Island!!

15   mell   ignore (4)   2016 Feb 23, 1:14pm     ↓ dislike (0)   quote   flag        

thunderlips11 says

Yes, it totally sucks using the dollar!

When I moved here I only got 4300 to the $1.

Now I get 5700 to the $1.

The Fed is weakening the dollar! When I moved here, a euro got you almost another 40-50%. Today, it's only like 10% more than USD... The dollar is collapsing! Call Ron Paul!!! Creature from Jekyl Island!!

But Europe is NIRPing (partially worse than the Fed) and they are getting the brunt of refugees. The US is still a safe haven reserve currency, and more important immigration wise. Geopolitically the US has the upper hand, so I'd expect the dollar to do relatively well compared to the Euro. Doesn't mean they aren't debasing it, which is easier to spot with domestic and local expenses. I'm sure as long as crook Draghi is at the helm we won't see much improvement wrt the EURUSD.

16   bob2356   ignore (4)   2016 Feb 23, 9:02pm     ↓ dislike (0)   quote   flag        

thunderlips11 says

Yes, it totally sucks using the dollar!

When I moved here I only got 4300 to the $1.

Now I get 5700 to the $1.

The Fed is weakening the dollar!

You beat me to it. Pretty funny, except no one is going to get it. How may people on patnet convert currencies on a long term basis or at all?

17   anonymous   ignore (null)   2016 Feb 23, 9:11pm     ↓ dislike (0)   quote   flag        

Lol

Da FED is destroying the dollar

18   indigenous   ignore (0)   2016 Feb 23, 9:23pm     ↓ dislike (1)   quote   flag        

Yup the advantages of being the reserve currency, and the largest military, and exporting inflation, and world wide deflation, and in the case of Canada et.al. the huge drop in the price of oil.

19   mell   ignore (4)   2016 Feb 24, 7:36am     ↓ dislike (0)   quote   flag        

Hey hey hey, gold on it's way up to $1300.

20   indigenous   ignore (0)   2016 Feb 24, 8:43am     ↓ dislike (0)   quote   flag        

Isn't it a bit early to count your doubloons?

21   tatupu70   ignore (0)   2016 Feb 24, 10:58am     ↓ dislike (0)   quote   flag        

Hater says

How can anyone say that the dollar is (absolutely, not relative to the rest of the world) not worth less than it used to be?

Of course it is, but who cares? It costs twice as much to buy a service as it did 20 years ago, but my income is 4X. Why should I be upset?

22   tatupu70   ignore (0)   2016 Feb 24, 11:43am     ↓ dislike (0)   quote   flag        

Hater says

tatupu70 says

my income is 4X. Why should I be upset?

Let them eat cake.

lol--I'm the guy voting for the Socialist. I think you're barking up the wrong tree there, bud.

Inequality is THE biggest problem facing the country now, IMO. But, the cause is NOT the Federal Reserve. Or inflation. The 1% puts out propaganda that folks eat up so they are distracted from the real issues.

23   indigenous   ignore (0)   2016 Feb 24, 11:44am     ↓ dislike (0)   quote   flag        

tatupu70 says

Of course it is, but who cares? It costs twice as much to buy a service as it did 20 years ago, but my income is 4X. Why should I be upset?

Another example of the Cantillon effect.

24   indigenous   ignore (0)   2016 Feb 24, 11:46am     ↓ dislike (1)   quote   flag        

tatupu70 says

lol--I'm the guy voting for the Socialist. I think you're barking up the wrong tree there, bud.

Which shows the Libby hypocrisy

25   tatupu70   ignore (0)   2016 Feb 24, 11:53am     ↓ dislike (0)   quote   flag        

indigenous says

tatupu70 says

Of course it is, but who cares? It costs twice as much to buy a service as it did 20 years ago, but my income is 4X. Why should I be upset?

Another example of the Cantillon effect.

Actually it's an example of increasing productivity.

26   tatupu70   ignore (0)   2016 Feb 24, 11:54am     ↓ dislike (0)   quote   flag        

indigenous says

tatupu70 says

lol--I'm the guy voting for the Socialist. I think you're barking up the wrong tree there, bud.

Which shows the Libby hypocrisy

Nope--it shows that liberals care as much for society as for their individual situations. As opposed to the "got mine, eff you" of the Republican party.

27   indigenous   ignore (0)   2016 Feb 24, 11:56am     ↓ dislike (1)   quote   flag        

tatupu70 says

Nope--it shows that liberals care as much for society as for their individual situations. As opposed to the "got mine, eff you" of the Republican party.

tatupu70 says

Of course it is, but who cares? It costs twice as much to buy a service as it did 20 years ago, but my income is 4X. Why should I be upset?

28   tatupu70   ignore (0)   2016 Feb 24, 12:07pm     ↓ dislike (0)   quote   flag        

indigenous says

tatupu70 says

Nope--it shows that liberals care as much for society as for their individual situations. As opposed to the "got mine, eff you" of the Republican party.

tatupu70 says

Of course it is, but who cares? It costs twice as much to buy a service as it did 20 years ago, but my income is 4X. Why should I be upset?

Sorry, I just have used "one" instead of "I". Why should anyone be upset when their income has beaten inflation?

29   indigenous   ignore (0)   2016 Feb 24, 1:14pm     ↓ dislike (1)   quote   flag        

tatupu70 says

Sorry, I just have used "one" instead of "I". Why should anyone be upset when their income has beaten inflation?

They shouldn't, but when it comes from an admitted Libby, it implies they received the money without earning it. Hint with any public service job this is the case.

30   tatupu70   ignore (0)   2016 Feb 24, 1:27pm     ↓ dislike (0)   quote   flag        

Ironman says

Says the guy who doesn't give a shit if taxes go off the chart because of Bernie as long as he gets less costly healthcare for himself....

You really need to stop assuming everyone is as selfish as you. I'd like the US health care costs to go down--I'm not that worried about my own costs. I do well enough that my taxes will certainly go up under Sanders but I'm OK with that if it leads to a healthier economy.

And, yes, before you or another dumbass poster says--why don't I just pay more taxes voluntarily? Because that wouldn't do anything to change the US economy. It has to be a change in the system.

31   Entitlemented   ignore (0)   2016 Feb 24, 1:47pm     ↓ dislike (0)   quote   flag        

Ironman says

You really need to stop assuming everyone is as selfish as you. I'd like the US health care costs to go down--I'm not that worried about my own costs.

As a middle age engineer, this is strike an unfortunate chord of truth. It seems no-one wants to make a sacrifice and do anything of value. Most of the people I interact with are paper pushers, and its reaching an all time high. It forces hard working people to waste time. Its not just effecting health care costs, its affecting every aspect of business and technology.

We need to cut back on government bureaucracy and waste, and private sector waste.

The US appears to be approaching peak bureaucracy - and the people need to sound the alarm!!

32   tatupu70   ignore (0)   2016 Feb 24, 1:49pm     ↓ dislike (0)   quote   flag        

Ironman says

Sorry dude, apparently you forgot specifically what you posted in the other thread. You didn't care if Bernie's tax plan when nuts, because YOU were going to save on YOUR healthcare, fuck the rest of the country... Having memory issues???

Please post that. I think you're having comprehension issues again.

33   tatupu70   ignore (0)   2016 Feb 24, 2:02pm     ↓ dislike (0)   quote   flag        

Ironman says

tatupu70 says

Ironman says

Sorry dude, apparently you forgot specifically what you posted in the other thread. You didn't care if Bernie's tax plan when nuts, because YOU were going to save on YOUR healthcare, fuck the rest of the country... Having memory issues???

Please post that.

http://patrick.net/AP+FACT+CHECK%3A+Clinton%2C+Sanders+on+health+care+after+Debate

And more lies from CIC. I said nothing of the sort in that thread.

Please quote my post.

34   tatupu70   ignore (0)   2016 Feb 24, 2:19pm     ↓ dislike (0)   quote   flag        

Ironman says

Lie much?

You want me to do YOUR work AGAIN on searching...

You really are a socialist..

Nope--I searched and there's nothing of the sort there. You are lying. Again.


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