That, for one thing, is against the guidelines of the Fed. The Fed's role is to manage the BANKING system and the supply of money available to the economy, as dictated by the financial system. You can go to the Fed website for more detailed analysis on this point, but that's the gist of it.
Technically, the Fed doesn't PRINT money. That is the Treasury. The Treasury releases cash, as printed, via the Fed when banks come for various "lender of last resort" loans (like the overnights). The Fed uses information from the regional Reserves and the banking system, in general, to help it regulate the interest rates.
Printing fresh dollars to just buy stock would be useless. The net effect would be to "drive out the good dollars", which has happened from time to time with fiat currencies. The saying "bad money drives out the good" is a reference to counterfeiting. As a supply of certain, bad, money proliferates, it becomes "cheaper" to buy stuff because this new (bad) money is available. Soon, however, prices rise in relation to the prevalence of this bad money and inflation kills both the original AND the new currencies. Inflation puts a stranglehold on the whole economy.
The stockmarket in the 90's can be viewed as a "sink" for excess cash. People weren't buying as many goods as the available money would allow, so they were investing it in the market because they felt the long term benefits would pay off there (they did...if investors were astute). This money was then recirculated into the economy via capital purchases to help boost productivity, which helped stave off inflation.
However, what is left over is what many consider an excess supply of capital goods, which means new purchases (particularly by business) is not necessary for some time. That is at least partially true. The extent of how true is still unknown, because productivity gains continue to be made, which means more of that excess capital continues to get "soaked up".
The concept of excess capital is a very old one in economics, but the possibility of long term excess has never been exhibited in real life. This is because most proponents of the concept forget to factor in time. Capital decays over time (we all depreciate our rental properties), which means it has to be maintained or repurchased. The timelines for this vary, depending on the capital in question. Let's say a house needs a new roof every 10 years, but you need a new car every 8, and a new dishwasher every 15. Since everyone does not buy these goods all at the same time, the key to productivity is managing the replacement timelines of consumers, so that you don't produce too much more than you can sell.
If you have been paying attention, you may have noticed the car industry is at the peak of that conundrum. It will be a good lesson to watch that situation and how it plays out.
The key to future market growth is not "printing money", but to generate new markets for spending. As new markets are created, more money is needed, and the economy expands. |
