What’s the Latest Development?
That the Dow Jones is nearing 15,000 points is a surprise to those who had expected a more humble market given the instability demonstrated by the financial crises. “The US stock market…is back. And it’s telling anyone who’ll listen: The fears of 2009 were overblown; the financial and economic risks that loomed so large have receded a bit. Yet the market is also delivering a more sobering message: Stocks can prosper when the Federal Reserve shovels vast amounts of 0 percent cash into the economy.” Pessimists are asking when will the Fed pull out, bursting our current bubble?
What’s the Big Idea?
As the stock market continues to rise and rise, what are we to make of a booming Wall Street when many other economic sectors are still suffering the letdown of the financial crash? “In a way, the Federal Reserve is forcing Americans into stocks. With interest rates essentially at zero, Americans can’t earn enough money from certificates of deposit to keep up with inflation. Bond prices, which move in the opposite direction of interest rates, have nowhere to go but down once the Fed allows interest rates to rise. That Fed support is proving to be a double-edged sword.”
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