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Comment by xoxoy | Hacker News Reader

The stock market is not the economy, as we can tell today.

I do think “things are different” in many ways, in the sense that it’s impossible to ignore the interventions the Fed has taken to blow up their balance sheet to $7T and will likely reach $10T by end of year. The speed and size is unprecedented.

Unfortunately I think Millennials will be the ones that have to deal with the massive debt we are in as a country and unwinding of the Fed’s massive balance sheet, which will play out 10-20 years from now.

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Yes, and there are even commenters in this thread whom openly admit the fed 'backstop' is a factor in their decision to play equities.

This market is highly manipulated and disconnected from reality on many levels - that's overtly obvious and intentional maneuvering via fed and pres. Only this pump and dump scheme isn't perpetuated by some shady OTC penny stock hype stunt.

When the equity bubble does burst (not if, but when) it will be very painful and unfortunately not just for those who are directly exposed but the collateral damage of all the free money will adversely affect those who are not day trading on the golf course, instead sold their clubs just to put food on the plate.

> This market is highly manipulated and disconnected from reality on many levels

I feel like this presumes some "baseline" market that never really existed. The Fed has a dual mandate - they will and should engage in whatever sort of outlandish monetary policy is necessary to achieve that mandate.

> When the equity bubble does burst (not if, but when)

Absurd that so many people think they can make predictions like these.

The dual mandate is full employment and price stability. Neither has to do with the stock market.

But the market reacts to action by the fed, for obvious reasons. That doesn't mean the market is "manipulated" any more than finding a cure for coronavirus would be "manipulating" the market when it jumps in response to the news.

>> The stock market is not the economy, as we can tell today.

This is spot on. There are a lot of regulatory forces which help to prop up the stock market artificially. It's hard to imagine that pro-corporation regulations can go much further without severely damaging the underlying economy on which the stock market depends.

What unwinding? The Fed's balance sheet is never going down substantially. How much did it unwind in the past decade?

See the Fed’s attempt in December 2018.

Fed tried to raise rates and let bonds purchased mature naturally and roll off the balance sheet. The market immediately tanked hard.

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