The Flinchum File

Thoughtful Economic Analysis and Existential Opinions
Subscribe to the Flinchum File
View Archives

An Unintended Consequence

12/29/2021

In 2020, about 350 thousand Americans were killed by Covid.  In 2021, another 500 thousand Americans were killed.

In 2020, Wall Street boomed, with the S&P up about 16 percent.  In 2021, the S&P boomed again, up about 26 percent.

So, how can the stock market continue to rise so much when so many Americans are being killed?

Money supply (M2) increased about $3.8 trillion in 2020 and another $2.4 trillion in 2021.

According to Monetarists, assets will soak up whatever money is available to soak up.

Hence, we first saw inflation in stocks and now inflation in goods.

Of course, in our insanely politicized world, Republicans blame Biden and Democrats blame Trump.

It would be more tempting to blame Fed Head Jerry Powell . . . but also unfair.

If the Fed had not been so aggressive increasing our money supply, I am convinced that the 2020 “swan dive” would have become a depression.

A bigger, long-term result is the increased concentration of wealth.

Saving us from depression, the Fed made the rich richer.

We are a fee-only advisor providing best interest fiduciary services to clients
in Chesapeake, Newport News, Norfolk, Suffolk, Virginia Beach, Williamsburg, and the surrounding areas of Hampton Roads.

CONTACT BAY CAPITAL ADVISORSWe Will Respond Promptly

Contact Us Bottom