The Federal Reserve’s Counterfeit, Printing-Press Money Will Create A Counterfeit COVID-19 Recovery

Week 25 of the Quarantine

SAN MARTIN, ARGENTINA – Do you see what is happening, Dear Reader?

We’re entering a new phase. Up until now, the Federal Reserve was backstopping Wall Street. This created a huge shift in wealth from average people – with few financial assets – to the “rich”, who own most of them.

But it was fake wealth. That is, the U.S. stock market could easily be cut in half. In a flash, about $17.5 trillion of “wealth” would disappear.

A few short-sellers – who bet on lower prices – would make money. But most of the $17.5 trillion would simply vanish. Poof! It would be gone.

Because it was never real… never an honest reflection of what America’s companies are really worth.

“Rout” on Wall Street

Yesterday, there was a modest selloff on Wall Street. Here’s Bloomberg with the news:

Stocks Post Biggest Rout Since June as Tech Sinks: Markets Wrap

U.S. equities tumbled by the most in almost three months as the rotation away from high-flying tech stocks gained steam, with investors questioning the sustainability of lofty valuations.

The S&P 500 Index retreated from a record high and fell more than 3.5%, its biggest drop since early June, amid declines in Apple, Microsoft, Amazon and Facebook. The Nasdaq 100 sank 5%, its largest decline since March. European stocks erased gains and finished more than 1% lower.

Why the “rout?”

Between the first of March and the first of June, the Federal Reserve added $3 trillion to Wall Street’s play money. Bouncing off this trampoline of fake money, stock prices rebounded… and went higher than ever.

This was despite falling GDP growth… and falling Earnings/Share growth, too. In other words, there was no reason for it – except the flush of the Fed’s new money.

But then, beginning in June, the Fed eased off. Its balance sheet – which measures the amount of cash it feeds to Wall Street – went down.

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