Robert Reich Predicts New Bubble
October 16, 2010 Leave a comment
Basically, he says that since there is no growth in the demand for goods and services (there are not jobs), as the Fed expands the money supply stocks prices will rise, we might say, artificially. Exports won’t rise since countries are all trying to adjust their exchange rate to their own advantage in the market.
Stocks are up even though the rest of the economy is still down because of money is already so cheap. Bondholders (who can’t get much of any return from their loans) are shifting their portfolios into stocks. Companies are buying back more shares of their own stock. And Wall Street is making more bets in the stock market with money it can borrow at almost zero percent interest.
When our elected representatives can’t and won’t come up with a real jobs program, the Fed feels pressed to come up with a fake one that blows another financial bubble. And we know what happens when financial bubbles get too big.