Monetary Measures Pt. 2 – Kapital Economics

This is Monetary Measures Pt.2 where we continue to look at the Federal Reserve’s balance sheet and M1 money stock. However, in this presentation, we analyze how these monetary measures affect the markets. In this instance, we review the Wilshire5000 against both M1 money stock and the Fed’s balance sheet. It is immediately evident that monetary policies are having a large impact on how equity prices are behaving. We observe the strong relationship with how stocks continue to move higher as further liquidity is thrown into the system via monetary policy. Such policy actions are tracked when analyzing the Fed’s balance sheet and M1 money stock. The question becomes and has been, how much longer will this relationship hold? It has been nearly 13 years since QE has been on the scene. Yet if this relationship breaks down, then what can be done to keep stock prices elevated and continuing higher? In essence, when this relationship breaks, then it may very well become a case of – look out below.
#Economy #Debt #Inflation

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