We did not have conventional inflation (goods and services) at the peak of the 2000 bubble because of the time lag of new found wealth in stocks. People are willing to purchase real estate and other stocks, and companies are willing to purchase other companies. All of those things did see massive "inflation".
Of the monies that have been squirreled away, how much of that has been reallocated from J6P to a select group of company officers who sold near the top?
Does an increase in MZM of $1 T have the same impact on the economy if it is more concentrated than if it is spread out among the entire population? The answer is no, because when it is more concentrated as it is now, compared to 2 years ago (or so I theorise), those with the money aim to spend it over their remaining lifetimes, whereas J6P spends it at once.
Although the recent decline is only giving back the stock gains, those "paper gains" cause massive misallocation of capital in the meantime. People took on debt, safe in the knowledge that the debt was covered by the equity in their portfolios. EG OCCF ex CEO. I am sure there were many others on the J6P level.
Now it is payback time and the stock equity is not there. It has been spent buying luxury goods, real estate, and building production capacity. Trouble is, it was spent before it was realised, i.e. while it was still a paper gain.
Is that extra trillion on the MZM going to find its way to the market, or was it taken from the market by those savvy enough to know better? |
