The Federalist: Why Are Democrats Hurtling the United States Towards a Stock Market Crash?
Article by H.A. Goodman in The Federalist
Since March 2020, $5.9 trillion in so-called relief spending authorized by Congress, as well as $3.3 trillion in quantitative easing from the Federal Reserve, has been pumped into the U.S. economy. America’s pandemic response resulted in 22 million jobs lost in a matter of months, and we still have 10 million fewer jobs than before March of last year.
The fiscal and economic repercussions of going from stronger than expected job and wage growth in January 2020, with an unemployment rate of 3.6 percent nationally, to toilet paper shortages and monthly stimulus checks has created an unforeseen bubble of monumental proportions.
Wall Street is dancing with moral hazard, with one out of every five dollars being “created” by the Federal Reserve in the past year leading to a record-high $822 billion in margin debt and margin debt as a percentage of gross domestic product (GDP) that surpasses 2000 and 2008. (Margin debt is when people invest borrowed money. It is a measure of how much of the stock market is inflated and sometimes leads to massive market declines.)
The recent $20 billion collapse of asset management firm Archegos due to defaulting on margin calls, the Reddit-inspired Melvin Capitol bailout, and the $300 billion potential default by China’s Evergrand might be a tiny glimpse of what lies ahead. Such market crashing would cause widespread panic, leading to “unprecedented” $30 billion margin calls in a largely unregulated $1 quadrillion global derivatives market, with banks that loaned the money used to purchase these derivatives contracts incurring losses in the hundreds of billions.
Despite recent hedge fund disasters and almost every economic indicator pointing to a potential stock crash, President Biden seems content with record highs in the market, and his administration has ignored a potential equities bubble.
Also, one would think Biden and Democrats would take into account hundreds of container and cargo ships docked outside of ports in the United States and China, as well as labor shortages and rising inflation, yet Biden seems to be asleep at the wheel. The Evergrande debt crisis, combined with U.S. national debt surpassing GDP and Democrats attempting to push it even higher, are also reasons Biden should pay closer attention to the economic fallout of a market collapse.
Adding to the risk embodied by trillions in volatile derivatives, unregulated by the SEC and other government regulators, recent stock market valuations don’t reflect today’s economic indicators. The Consumer Price Index, Producer Price Index, Baltic Dry Shipping Index, and overall inflation are all at highs not seen since 2008, while consumer sentiment is nearing a decade low and the dollar is decreasing in value.
If Biden is truly focused on protecting the United States from another financial catastrophe, he should begin addressing why the Buffett Indicator is at an all-time high, or why the Fed keeps .......
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