Thanks very much.I have written to Shostak asking for further clarification of the figures behind the graph.
Meantime, did you read this interview with him?
mises.org
Excuse a lengthy quotation:
Most economists believe that if the stock market is going up, the economy is being revived. But
altering the valuation of stocks does not change reality. It is only a manifestation of what people
think about the real world. And if you print money, you corrupt the signals that lead people to
make rational decisions. Right now, people are being led to form false perceptions about reality.
That doesn't mean that people cannot make money in stocks, but it does mean that the present
rise of the stock market cannot be sustained.
In the real world, there is no way a company with no earnings can be properly valued at half a
trillion dollars. And yet that is what we are seeing. Someone may say: but these companies may
produce something someday. Sure, but there are limits. A new Volkswagen is a good car, and it
may have a surprisingly high price due to popularity. But when the car sells for a million dollars,
something has gone very wrong. It doesn't matter how spectacular the new technology is.
Resources are being misallocated.
Even aside from these absurd prices, you can know that malinvestment is taking place by looking
at the money-supply figures. They have been growing for years, and every time a crash or a
recession is threatened, the Federal Reserve intervenes to save the day. When will all this end?
There is no way to know. But the fund is not unlimited, and when the means of sustenance are
not there, the growth cannot continue. The music will stop at some point, and, when it does, all
the new credit in the world will not revive the economy. The new money can pour in but people
will not use it to invest. |
