QE to Infinity and Beyond!
Biderman on QE to Infinity!
Then, in May 2010 and again in May 2011, the stock market started a sell-off that lasted several months. Will that happen again this year? I actually do think we are at the start of another stock market decline.
Why? Because the ups and downs of the stock market are all due to the actions of the Federal Reserve. It is their money we are playing with.
Before the Fed took over control of the stock market, new money for stocks used to come from the amount of wages and salaries and other income not spent, also called savings. But no, not anymore.
In March 2009, the Fed announced an $800 billion QE1. Stock prices, which were cut more than half to a $9 trillion low from a $22 trillion peak in 2007, soared back to $17 trillion by April 2010, recouping 70% of the top to bottom decline in stock market prices.
On the other hand, how did the overall economy do during QE1? Nowhere near as well. While stocks recouped 70% of the decline, taxpayers after tax income, including capital gains, barely rose by the end of QE1.
QE1 ended in March 2010, From May 2010 stock prices dropped from $17 trillion, to just over $15 trillion by August 2010. Then in August 2010, the Fed announced stimulus package two, a $600 billion QE2. Stocks took off again and peaked at just over $19 trillion at the end of April 2011; two months before QE2 ended.