Go Darke

Light thinks it travels faster than anything but it is wrong. No matter how fast light travels, it finds the darkness has always got there first, and is waiting for it

Economics

Reality disconnect

People keep asking me to explain why, despite all the crisis the world finds itself in and the associated economic collapse that seems inherent in such musings, the stock market is booming.

Okay…

No one has really asked me this. (My wife did just ask me to my take burgeoning collection of coffee cups to the kitchen… a request to which I am current feigning inattentiveness)

My Ego likes to pretend that he is omniscient, and imagines that, if only people knew this, I would be inundated with requests for commentary on all manner of esoteric and mundane contrivances. (Meanwhile Id is busy burning down a corn-field). I laugh at my psych one-oh-one joke. It’s tough crowd in the dark, cavernous interior of Joeys mind. If I don’t laugh at my jokes no one will.

As usual, with all things fiscally problematic, this is because of the United States. In a way, they’re lucky (but also not) because they have the worlds premier currency (ie the one everyone likes to have). Usually when other countries ‘print’ more money there are pesky repercussions… like inflation and downgrades… and people freaking out about the mind boggling levels of indebtedness. The United States is the caveat to this rule because it is comfortably smug in the knowledge that no one is going to hoard Yuan, or Rubles or Pesos. (Its also one of the reasons they need to make sure China doesn’t become a serious contender for world domination… and also, as a personal request, because I don’t want to learn Mandarin*… it looks hard)

*Hey if you guys win (which I’m sure you will on a long enough time line, know that I backed y’all from the beginning! 东方红 !!!

In any event. The Federal Reserve prints a whole bunch of money. Thats the line that most often get bandied about. That isn’t really true. IN REALITY, they actually open up their world domination spreadsheet in Excel (or maybe google docs), right click somewhere near the top and add a zero to the dollar column. Actual printing is soooo last century.

Ok… actually, actually they go out and buy bonds. Imagine something slightly more formal than an IOU written on a Wendy’s napkin promising to give the bearer of said Napkin one hundred and five dollars one year from today for the hundred dollars you will give me right now. The fed usually buys Treasury bonds… not directly from the government though… through the market, ie brokers and dealers. If this sounds a lot like giving yourself five bucks and a blowjob… thats because it kinda is.

Wait… did I mention why the Fed wants to increase money supply in the world? Well, in economic theory, if you pump more money into the market… it stimulates the economy… because (currently) the world economy is dying and needs… well… probably 1.21 gigawatts of electricity (conveniently supplied by a bolt of lightning and channeled through a clocktower)… but a metric fuck tonne of money might also do it. (maybe).

So you now have $100 and something dollars because you traded this dirty napkin thing… which you didn’t have before. Awesome. Not you little people I mean. Mostly think banks. So what do they do with this money?

Well… they spend it. Like theres no tomorrow. And that money flows through the economy and (theoretically) everyone is better off. The downside is (usually) that more money chasing the same amount of goods makes things more expensive and you get inflation.

I’m picking on the Fed, but really Congress with their trillion Dollar stimulus package is… also… eh… responsible.

With all this money floating around ‘people don’t know what to do with it. Can’t stick it in the bank because interest rates are zero… so you…umm … lets invest it in the stock-market! Okay cool… which stocks? Does it matter? Buy all of them.

If you’re thinking this is completely insane? Well… that it’s because it is. How long can this carry on for. Interestingly, it can… maybe… carry on for a really long time. Or… it could all come crashing down… wait… Monday is a holiday in the US… so let’s say Tuesday.

I mean some day, someone will have to pay the piper. (I only have a vague understanding what this idiom actually means)

Hopefully it won’t be us. Because we’ll all be dead. From Covid. Or MERS. Or global warming or whatever.

Basically what I’m saying is stop worrying and learn to love the bomb.

OR maybe I’m saying

“It means your future hasn’t been written yet. No one’s has! Your future is whatever you make it. So make it a good one!” – Doctor Emmet Brown, Back to the future, part III.

But probably the former.

BACK TO 1%

2 Comments

  1. The Pink Agendist

    at

    Is your portfolio up? I’m down 12% from before the virus thing began. At one point it was down 25% :/

    1. Jo

      at

      Um… *checks* On pure investment type stuff I’m still or rather we are still in the green at +12.66% I say we because the investment account actually belongs to my wife.

      To be fair I have been buying some stuff in that portfolio that got particularly smacked down (and has now gone back up). And there is some currency hedge in there thats adding substantial buffering to some of the other stuff thats still getting murdered.

      If it makes you feel better my property index was down 55% at one stage… which I’ve also been buying like crazy (but is still down)… one day, people will head back to the malls and need office space and tenants will start paying rent again. (probably)

      The markets are still looking quite sketchy… and I think will probably wobble around for a while yet. If you just leave it alone it will all be completely fine and looking really solid again in a couple of years.

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