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It’s as simple as can be: if a government churns out trillions in order to prop up asset prices, then (1) people with cash will be holding something worth less and less every day (2) people with stocks and real estate will be holding something worth more and more every day. Brutal……….but real.
Let’s look at the latest from the Fed. Here we see the BTFP program, which shutters its doors in just a little more than a week. What a different a year has made, huh? The banks gobbled up hundreds of billions of dollars of free money, and they only stopped when the Fed FINALLY stopped paying them above-market interest rates (that is to say, free money). That’s why we’ve flat-lined for the past few weeks. Anyway, please note that the BTFP closure doesn’t mean they all pay their money back. It merely means they can’t ask for even-more-hundreds-of-billions anymore, at least until the next government creation.
