A Confetti Of Funny-Money & Confidence In Confidence Men

Business,Debt,Economy,Federal Reserve Bank,Inflation

Big media (BM) is making a big noise about the stock-market rally, which the same BM attribute to King Tut’s animal spirits. Reports Bloomberg.com: “U.S. stocks rallied, sending the Dow Jones Industrial Average above 14,000 for the first time in five years, as data on the labor market and manufacturing boosted confidence in the world’s biggest economy.”

The “market’s” confidence in confidence men, notwithstanding, how are these “Big Gains” possible in “a debt-fueled economy”?

Easily: The consequence of Ben Bernanke’s non-stop monetary stimulus is a rise in prices, stocks included. Homes too. But an increase in the price of an item is not the same as an appreciation in it value.

“Markets are now driven by stimulus, not fundamentals,” notes investor Peter Schiff, who also expects “deficits to approach $2 trillion annually before Obama leaves office.” (His is a reasonable assumption based in evidence.)

“Monetary and fiscal stimulus [are] pushing up stock and bond prices.”

…it is important to look at the nature of the rally. Most significantly we would bring investors’ attention to the increase in gold and oil and other assets that are expected to outperform in an inflationary economy.