If the current thinking continues, the world’s central banks will buy whatever paper governments issue. The result by the end of the decade will be a Federal Reserve balance sheet totaling $40 to $50 trillion.
The stock market does not have a life of its own. In a relatively free economy, success or failure of investment in stocks depends ultimately on the same factors that determine success or failure of any business.
Just how is this magic created? The spurring of demand in the midst of a covid-created depression. The wizards at the Fed and Treasury have created an intoxicating frothy brew for stock and home buyers alike.
It is often claimed that inflation reduces the true burden of debt. This is true for existing debt, but those who advocate it as a remedy for government indebtedness fail to understand that it also increases the cost of the government’s future debt.
Central bankers are saying two things at once. First, they say that negative interest rates are a natural historical development. But then they say negative rates are an essential tool central banks are using to manipulate the economy.