A Question of Money – Interest – Bankers
QUESTION:
Mr Armstrong, interesting article today, the story of the store of value (at least long term) has always confused me. One can look at saving accounts also as an asset as it yields the interest payment and one relinquishes the access to the money. No difference to bonds.
But your article causes some questions: as you stated before the FED buying bonds does not increase real money supply, so what caused the decline of purchasing power of money in the asset class of equities? Is it that the manipulating of interest rates distorted the actual confidence and time preference in the economy which can be measured by the velocity?
You posted earlier that the velocity has declined. People do not want to invest but save which is not an option for big money as it doesn’t yield any or very little return. Hence enterprises buy back shares and smart money has no other option.
Interest rate hike by the FED, eventually increasing retail participation, a cooling world economy, sovereign debt crisis and the flight to the Dollar. The outcome of your computer, a rise in US stock markets including a possible phase transition, seems comprehensible.
The only thing what leaves me with amazement is what do they really intend? I don’t believe that the families who run the banking system, operating for centuries in money business, do not understand that. I can only assume that for being protected by government the banking cartel buys the governments time and keep financing the deficits.
Best regards,
G
ANSWER: The problem in so many areas is that we can focus on one issue, but the answer is a complexity of variables.
…click on the above link to read the rest of the article…
