Much has been said about the current inflation, high gasoline costs, etc. It is not that hard to understand.
If a company issues more stock, the value of the stock goes down as it has been watered down. Twenty years ago, gold was $260 per ounce. Now it is a little over $1,600 per ounce. We read about value in 1970 dollars: $1 million in 1970 is equivalent in purchasing power to about $6.9 million today.
One large source in the last 14 years has been Quantitative Easing. The normal increase has been boosted beyond the past normal, as QE1 was first implemented in November 2008. It worked.
So how does Quantitative Easing work? The Feds lower interest rates and print more money. They water down the value by printing more money just the same as a company issuing more stock. That is why, recently, $100,000 houses were selling for $160,000 (or more).
There has been much noise about rising interest rates. In 1979 we paid 13% interest for our first home. We would like to get the 4% savings rates we got years ago when the housing interest was 6%.
The former president wanted to implement negative interest rates. You would have been better off to put your money in a coffee can than to have it in a bank and or in bonds.He equated the stock market to the economy, but there is a lot more to the economy than just the stock market.
It is a tight-rope walk managing the economy, and thank God the Federal Reserve is not controlled by the politicians, but the Feds do not always get things right either. QE is a good tool, but overusing anything can create havoc.
Be responsible for yourself, and require your elected officials to be responsible also in everything they do and propose. And if they do not propose anything (reasonable), then it is time to get rid of them.
David O. Smith
Lima
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