Fed vs Markets

In the recent past, when the Fed practically gave away trillions of dollars to the US economy and the rest of the world, the consequences were, and continue to be, devastating, beginning with the bankruptcy of the US banking system, which has cost the rest of the world dearly. The excessive liquidity brought abundant gains in the capital markets. For a long time, American citizens tirelessly bought all kinds of goods and services, including real estate, making excessive use of credit, as well as the government, which, as usual, abused spending, the markets multiplied their multiples by dozens.

Excess liquidity was not controlled, on the contrary, the dollar factory continued to produce currency in huge quantities, to which the European Central Bank and the Bank of England joined, not to mention the central banks of China, Russia and India who at the same time being inundated by dollars felt strongly enough to produce the same amounts of their coins. Due to the different nature of the central banks and the markets, the latter did nothing more than gloat with joy, earning billions of dollars in the face of the unattractiveness of bank savings and treasury bonds. The result was the exponential rise of companies, in one or two years they were worth billions of dollars, prices that companies 100 years old in the markets never reached. Thus companies like Coca Cola, Ford, McDonald’s, Walmart with decades of existence and work were easily surpassed in value. The new way of doing trade based on the use of technology on a large scale was strongly driven by exorbitant and fast gains in the markets due to the large amount of liquidity. These excesses are the main reason why hundreds of millions of people are now suffering from the rise in prices not of company shares, but of the most mundane things such as food, rent for their homes or their children’s tuition fees. . The current price levels have not been seen in decades, in response to these inflation rates the natural reaction is to swing the pendulum to the other side, stopping the money factory, withdrawing and making the cost of money more expensive. This is not understood by the markets lately accustomed to earning a lot in a short time, because we are accustomed to paying too much attention to their behavior and zero attention to what daily life costs people. From now on we will see expensive money and markets in displeasure fighting with the central banks to return to abundant and cheap money to continue its unstoppable streak of profits even at the expense of millions of people who see how their standard of living decreases.