Common Cents

Dougstuber's Blog

China lends us a lot of money.  China is going through growing pains at the same time the FED raised interest rates, ever so gently.  But even a gentle raise ripples through strong economies, and can damage weaker ones.

Stocks over a medium term and bonds over a short but precipitous term react badly to interest rate hikes, especially on the heels of the Feds quadrupling of the money supply via Quantitative Easing.  Yup that’s quantitative alright.  The prayer here is that all these extra dollars in float STAY in M2 meaning stay invested in stocks and bonds and real estate.  If not, and some folks sell stocks to buy other things (rental properties, land, gold, silver, platinum, fancy cars, more houses), then it leaks back into the M1 supply and real live inflation is guaranteed, with the hope it doesn’t go to 700% a year a la South American…

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