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Post by Roger (over and out) on Feb 25, 2014 6:32:27 GMT -5
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Post by rmarks1 on Feb 25, 2014 13:47:57 GMT -5
Yes. Correct. And why is this happening? The FED has been buying $85 billion of bundled mortgages every month in order to "stimulate" the housing market. That's almost $1 trillion a year (they recently lowered that to $75 billion a month, but that is still a lot). Where does the FED get the money to do this? They "create it." This expands the money supply.
Where does that money go after it is pumped into the economy? Not into savings accounts. The FED is also keeping the interest rates extremely low, also to stimulate the economy. This means interest rates on savings accounts are also very low. In search of higher returns, the money goes into the stock market. In other words, the stock market is no longer being driven by a strong and growing economy. The main driver is money being pumped in by the FED.
What could burst the stock market bubble?
1) A rise in inflation, forcing the FED to raise interest rates.
2) The end of the stimulus. If the FED stops buying those billions of dollars in bundled mortgages every month, there is no more money to maintain the bubble, and it bursts.
Bob
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