I looked back at gold vs stocks and the last time stocks and gold rose at approximately the same speed, was just before the 2008 crash.
It makes a lot of sense that investors would want to put their cash in the market and/or take advantage of low interest rates to lever up.
If you're willing to bet the dollar's going to crash in the next few years due to Fed policy, it makes sense to write dollar-valued IOU's today and use them to buy stocks and gold, knowing you'll be able to pay them back with cheaper-valued future dollars.
> [...] knowing [...]
These things are not the same.
And crash against what? Other currencies are faring far worse.
It'll crash one day. The world will change. Statistically speaking when it does it will likely be for the worse too.
You can read about how inflation is calculated, it makes sense: https://www.bls.gov/cpi/questions-and-answers.htm
https://www.bloomberg.com/news/articles/2020-08-12/russia-di...
Don't know well about how US Feds and govt are incentivised
I don't know anything about anything, but it seems to me this is a logical consequence of inflation? Purchasing power of $ goes down, prices (of everything) go up.
People incorrectly assume inflation means "the price of everything goes up". The problem word here being everything.
Why? Well because prices aren't merely dictated by supply, but rather supply & demand. Simply comparing inflated money supply to the good supply is naïve, as it ignores to factor in the demand for different goods.
As so, for a dumb example, it's entirely possible to have inflated stock prices but not see inflated sock prices, if all the extra money is chasing stocks, and not socks...
Because they've spent a few generations making sure people don't understand the difference between price inflation and monetary inflation by using the two interchangeably.
This whole sub-thread is a perfect example, "the Fed has been printing money like there's no tomorrow but, look, there's only 0.44% inflation".
Inflation has been "stubbornly low" for 20 years while asset prices have outperformed historical averages the entire time.
Asset prices seem to have diverged from the real economy because assets are primarily funded with debt (real estate, corporate investment) which has been artificially priced lower, while goods are paid with earned income which hasn't been manipulated.
> Asset prices seem to have diverged from the real economy because assets are primarily funded with debt
Or maybe it's because with rising productivity, capital has become more valuable over time.
In fact it would mean that the only people who can afford assets are people who already have assets.
> "Or maybe it's because with rising productivity, capital has become more valuable over time."
We have 0.1% interest rates, negative in some countries, that indicates a glut of capital, not "shortage of valuable capital"
It's incorrect to refer to monetary inflation as just "inflation." If you're talking about price inflation, we're not seeing that yet - although 5 year inflation expectations are popping back up again [0]
So far, it's looking like the Fed is doing as best as could be expected.
Only true if everything else holds constant. Also, wouldn't just apply to asset prices but all prices.
Everything else, unfortunately, is not holding constant. [0]
So much like how the S&P/NASDAQ has a bias for growth because losers are swapped out for winners, the CPI basket has a negative price bias as expensive goods are swapped out for cheaper ones.
Like if all that new money isn't being used to buy things like food or even housing that factor into the inflation index than wouldn't we see something like this where gold and the stock market inflate because that's where the cash is going?
Now I'll buy the idea that isn't necessarily going to cause shortages and price rises in consumer goods, but the idea that it doesn't cause changes in asset prices is too much. Are these rich people supposed to be idiots? There is no return on cash and new money is being created at a fast clip.
Increasing money supply without any change in velocity or other exogenous factors is inflationary for asset prices, etc.
Real-life, however, is not a vacuum [0]
Foreign demand for the dollar is at all time highs. People forget this and don't think about the impact that this has on currency prices.
Also, the "inflation is actually happening they just don't measure it right" crowd are delusional. Maybe they were right before covid, but they're extremely wrong now.
Was reading just the other day that inflation is actually underestimated right now.
People are buying basics, like food, at far higher rates than normal, prices for those basics are rising, but the CPI hasn't adjusted the ratios. Ergo prices are higher where it counts but the index doesn't see it.
In my opinion, continued inflation in financial assets will / is already partly causing inequality. It's not good for society if the middle class has trouble buying houses or real estate - it tends to lead to a lot of anger and political polarization, as we've seen.
Just because you don't understand why the market is priced a certain way doesn't mean the market is irrational.
Perhaps stocks went up because of the expectations generated by past Fed policy stances post-2008.
Interest rates are insanely low, which means putting your money in the bank, or in bonds, has a near-zero return. There are tons of massive funds (vanguard, etc) that have promised a return to their investors, and they're moving money from interest-based investments to other investments. This has caused a ton of money to be put into the stock market, which drives multiples up.
Why gold is going up:
The government is printing a ton of money to deal with the pandemic. This causes USD's value to drop compared to other currencies. There's a small (but real) possibility that the US dollar stops being the world's reserve currency. This causes people to seek value stores other than USD. This includes gold, bitcoin, euro, yen, renminbi, which are all up vs USD since the pandemic started.
These two things happening at the same time doesn't necessarily mean the stock market will crash.
Somethings are lost opportunities, eg: _today's_ lunch being provided by safeway + my kitchen vs a restaurant.
And no, this is not due to inflation (Which is near-zero). This is due to QE, and easy credit.