David Stockman on How the Stock Market Got to be Out of Touch with Reality

  • What’s going to “give” sooner or later is the entire house of monetary cards erected by the Fed and its fellow-traveling global central banks over the last several decades. What they are doing is based on the triple error that inflation is too low, that deeply repressed and falsified interest rates fuel real growth, and that private savers are a hindrance to optimal economic function and need to be euthanized via confiscation of the real (after-inflation) value of their capital.
  • If the 2% target is zealously pursued via prolonged pegging of interest rates to the zero bound and the massive purchase of bonds and other securities, the result is actually inimical to economic growth and sustainable gains in real wealth. That’s because falsified interest rates and inflated financial asset values lead to massive malinvestment via rampant financial engineering in the corporate sector and reckless borrowing to fund transfer payments and economic waste in the public sector.