From: Don Bowen KI6DIU <don.bowen AT earthlink.net>
To: homestead AT lists.ibiblio.org
Subject: [Homestead] What some of it means
Date: Tue, 25 Sep 2007 06:43:03 -0700
Recently we had a discussion of the meaning of the economic bad news
flooding us. I am slowly starting to understand a small part of it. One
is the massive injection of money supply and the big jumps in the stock
market coupled with the free fall of the dollar.
It is all perception or feel good publicity. The Fed wants the stock
market to fly because that number is reported in almost every news
outlet. People may not have any money in the market but when the numbers
are flying people feel good about the economy. If the market tanks it is
reported far and wide and people feel bad about the future of the
economy. So the fed bumped up the market, exactly the same thing they did
just after the dot com bust and exactly what fed the housing bubble.
Another part of the puzzle is the tanking of the dollar. People holding
dollar dominated instruments realize that with more money in circulation it
has less value so they bid down the dollar. In order to attract the
foreign investments needed the stock market has to climb to mitigate the
affects of the declining dollar. There are some other heavy downward
pressures on the dollar such as Saudi Arabia moving away from the dollar
for oil transactions.
Meanwhile there are domestic pressures for significant inflation in the
near future, mostly because we insist in pouring food through our SUV gas
tanks.