One Step Forward, Two Steps Back?
What do the 2010 home buyer tax credits have to do with today’s stock market?
After producing a huge spike — actually two, due to the initial credit being extended and expanded — the housing market resumed its swoon.
With a vengance: the second half of 2010 and well into 2011 were terrible for housing sales.
Ben Bernanke & QEternity
Now, instead of two, discrete government interventions, imagine stocks and bonds benefiting from essentially continuous government intervention (“interventia?”) and stimuli since The Crash of 2008.
If/when said stimuli are withdrawn — or just as ominously, fail to stimulate anymore* — might something similar be in store for stocks and bonds?
Stay tuned . . .
*Economics recognizes the diminishing effect ever-lower interest rates have; the phenomenon is referred to as a “liquidity trap.”
And you wondered why economics is called “the dismal science” (or, maybe you didn’t).