How high will the stock market go? In Fantasy Free Economics, there are no constants nor independent variables. Most variables do not lend themselves to numerical values. An example of a non numerical independent variable is the level of stupidity of the overall population. Observations indicate that the modern U.S. based level of stupidity if not at the highest level in history is close to the highest. Two very high levels were those of Germans prior to and during WWII and the Roman Empire during the period when the Huns were invading.
The Germans, with help from their elite, believed they were a master race and thus justified in dominating all others and exterminating some that were deemed living but not worthy of life. Those ridiculous notions died along with the literal deaths of most Germans who believed that nonsense along with their children and the innocents they murdered before the war was over.
The Roman demise was not sudden but the Huns and others managed to anchor themselves into the Roman empire while Romans wallowed and basked in their imaginary greatness and high self esteem.
In the modern U.S. era, the Muslim and terrorist migration is much like the situation where the Huns invaded Rome. Idealistic people are good with it while overlooking the fact that many thoughts and lifestyles are not immediately compatible. Sometimes it takes thousands of years for people to adjust and learn to live together peacefully. Real world thinking has no place in the minds of the idealist elitists who expect all others to automatically adopt their silly notions.
The mentality of Americans is like a giant well of stupidity where folks dip their buckets in and pull out countless gallons of unfounded self esteem building notions that make them feel like good people. They then start repeating mantras that they profess as their own ideas.
What does this have to do with the stock market? The Federal Reserve is a critical institution that promotes sound economic policies. Federal Reserve members are deemed to be selfless public servants all filled to the brim with the very human imaginary incentive to serve. All of these notions are living in the brains of American citizens and anchored in like dry cement.
Of course, outside of the minds of the rank and file animals, something entirely different story is being planned out.
The public believes in official economic stimulation. They believe the government has the capability to improve the economy through its planning function. This is all comforting.
The level of stupidity is a variable. It can and does change. Here, in very simple terms is why the stock market is up.
The Federal Reserve, in the real world where it and a few others live, is a political institution. Its members are indeed economists but their function is to carry out the political initiatives of the elected officials they serve. The public’s perception is complete nonsense.
Beginning in 2006 a desperate initiative was begun for the purpose of protecting the wealth and incomes of the wealthiest individuals on the planet. In all of the time since, there has never been a chance the country as a whole would benefit.
Government policy for the longest time has been doing nothing other than providing a means for corporate insiders to make as much money as possible in the shortest period of time. They are given free money to use while the rest of the world can only use the money they can earn or borrow according to their abilities to repay it. With this unlimited well of interest free money, corporations can buy back their own stock, drive up the price and sell at profits far greater than what they would be if they had to depend upon business operations. They can also borrow to pay themselves dividends. When the number of shares outstanding decreases, it is possible to report per share earning increases even when business is bad. Laws are not enforced when the profits of a corporation might be hurt as a result. There is more. I could write a book but that is enough to make the point.
The public has not yet caught on to the fact that there is no stimulus. Genuine stimulus is not even possible. The public is not yet suffering quite enough to to wonder if perhaps they are getting taken to the cleaners. All of these things cost the public dearly, they just don’t know the magnitude and can’t see how it is being done. We are talking about a level of awareness. Imagine a seesaw with belligerence on one end and public awareness on the other. Right now the seesaw is about balanced. Add just a few ounces to the awareness side and the seesaw will be moving in the public’s direction.
When the public wakes up and refuses to be exploited, the stock market will crash and current prices won’t return to current levels for perhaps twenty years. A stock market crash seem like a bad thing and you will hear lots of noise from some who are negatively affected. Don’t worry, it will be for the best. Recessions are a natural part of an economic system. A recession cannot be prevented but only postponed. The longer the recession is postponed, the greater the calamity that will occur when it finally happens.
When the public becomes only a little more enlightened, they will put away their wallets and there will be a reckoning.
There is a possibility, that the public will remain stupid indefinitely. It will take longer, but in a short time, the underlying economy will be so damaged that no political trick known to man will keep the market up. We are not far from that point either.