How does propping up the stock market help?

M

maxitronixy

Ive heard many times on how the fed props up the stock market.
To what end? besides allowing companies to raise capital or inflate away the deficts, how does porpping up the stock market help the economy? People feel richer and spend more when the markets are up?
 
This is very interesting....

Fed $ going to the banks is a form of leverage....

ie Inserting $ to lever ie via the banks....

Stocks...ie same story....


But the point which you are making is 100% correct
in that the $ is coming from a non-sustainable and false means....

Why ? There would not be a single poor country in the world.....if printing money was a valid solution....

At best the Fed hopes to serve as a smoother of the economic process....

So their argument is what if we did not print $...?

The bottom line being it did not work for Japan....

And will not work for the US either...

The valid point being sustainability...

And this only can happen with business creation and development....

Whereby the current administration....is moving in the opposite direction.....

The US will only show real recovery through debt destruction and business development....

The CORE PROBLEM......THE POLITICOS....

When one does not find a solution for the core problem....how can a solution form ????
 
Thats exactly right...when people feel richer they spend more. Just look what happens when you give a broke guy a $10,000 credit card. Most will go out and spend like it was free money.

But yeah...people will stop buying anything if the stock market goes down. If you own $100k of ABC stock and it drops in value 25%, in alot of peoples minds, they just lost 25k. They sure will not go out and buy that new car anymore that they were planning to. Especially if they were planning to sell some stock to pay for it or put a down payment on it.
 
Quote from peilthetraveler:

If you own $100k of ABC stock and it drops in value 25%, in alot of peoples minds, they just lost 25k.
More...

They did just lose 25K.
 
Ben Bernanke no doubt subscribes to George Soro's theory of Reflexivity. People and companies feel better and spend more when share prices are higher. Higher share prices can reinforce themselves by improving the economic situation for the better.

Bernake's solution is to the crisis besides quantitive easing is to support share prices. Geithner has said a double dip recession won't happen, IE the PPT won't let share prices dip. The move upwards in equities is not entirely surprising, investors love to bet on a recovery. The size of the move versus relatively low fund flows is highly suspect. If nothing else, the feds are manipulating the markets through word.
 
I would also add that a good chunk of the economy is asset-value based. When those asset values drop, 401Ks, Insurance Companies, Pension funds, and other Institutional investors suffer.

Think of the far reaching consequences to the F.I.R.E. economy if asset values drop significantly and stay low. The Ponzi system collapses.
 
lol all the notes have explained exactly why this ends in horror. we've now come to believe the mkt can't drop if the fed doesn't want it too. we believe the fed is a god.in the end all this will fail
 
My theory is one of the "simplest explanation works best".

The fed prints a lot of money... it has to go somewhere...
The stock Market is an easy place to dump the money you just printed ....

I don't think they care about the negative consequences, if any. But historically in the last 25 years gov't buying during Market duress has worked- but you never did hear what and how much, if any money was made on gov't buying during the crash of 1987. Anyone have any info on that event?
 
Short time it might fool some into consuming more but the move down will cause more harm than the benefits from the upmove. But it´s all about kicking the can it seems.
 
this proping up of the stock market helps the wealthy exit and leaves the common person riding his 401k back down.

bp
 
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