Thursday, January 3, 2019

Stocks and the money supply

The assets on the Federal Reserve balance sheet increased from one trillion in 2008 up to 5 trillion by 2015. This put lots of money into circulation and kept interest rates low. In November of last year they started to correct this situation at the rate of $50 billion dollars per month and since that time the Dow Stock average has dropped from $26,000 to $22,000. As the money supply decreases interest rates will rise and the economy will slow. This so called winding down will continue for years unless the fed deems the disruption to the market is too severe. It is time to pay the piper for the price of overcoming the financial crisis of 2008.

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