The Biggest Global Asset Bubble That Ever Was And Ever Will Be.

Originally posted by Infose: ↑

"They dont just let this continually rolling forever. Thoughts on this end game?"

They, the big boys, etc., who are these sinister figures?

Faced with a potential fall in aggregate demand ( the total spending by investors, consumers, etc, - the income of a person is the expenditure of another) the monetary and fiscal authorities decided to stimulate the economy by lowering the interest rates through the expansion of the money supply and having government to increase spending via deficit spending, that is, without having recourse to extra taxes.

Hopefully, when confident that this fiscal and monetary stimulus is no longer required then the current expansionary policy is expected to change to either a neutral, or contractionary one.

"What Is Fiscal Neutrality? Fiscal neutrality refers to a principle or goal of public finance that fiscal decisions (taxing, spending, or borrowing) of a government can or should avoid distorting economic decisions by businesses, workers, and consumers. A policy change can be considered to be neutral to the economy in either a macro- or microeconomic sense (or both).In a macroeconomic sense, the idea of a fiscally neutral policy is one in which demand is neither stimulated nor diminished by taxation and government spending..

A balanced budget is an example of fiscal neutrality, where government spending is covered almost exactly by tax revenue – in other words, where tax revenue is equal to government spending. Fiscal neutrality in this sense means that the government’s overall fiscal policy is neutral with respect to aggregate demand in the economy. Because the government doesn't have a surplus nor a budget deficit, according to Keynesian economics this type of fiscal policy will neither expand nor contract aggregate demand. "

Note this is not 100% correct because even a balanced budget can be expansionary.

https://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=balanced-budget+multiplier

In a sentence, a so-called “neutral” monetary policy, also called the “natural” or “equilibrium” rate, is the federal funds rate rate that neither stimulates (speeds up, like pushing down the gas pedal on a car) nor restrains (slows down, like hitting the brakes) economic growth. "

In a contractionary policy government creates surpluses and the central bank increases interest rates by contracting the money supply leading to lower expenditure.

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'Hopefully, when confident that this fiscal and monetary stimulus is no longer required then the current expansionary policy is expected to change to either a neutral, or contractionary one.'

You don't think the fiscal and monetary stimulus has been overdone in the last few years?

I'm with ididwork and dolcevita on this one, in that the fiscal and monetary policymakers first bailed out the banks, and then facilitated the type of fiscal/monetary policy (which you call expansionary, but I call loose af) which has created the enormous asset bubble we have today. People have indeed been brainwashed in the last few years into believing that this is a conventional economic setting and so are taking on huge risks in not only investing in stocks and cryptocurrency, but real estate too. It is indeed a global asset bubble, an 'everything' bubble, recklessly built on leverage and the fear of missing out.

In 2021 investor exuberance reached fever-pitch. People are not only bidding up the prices of real assets, they are paying hundreds of thousands and even millions of dollars for virtual assets! But alas, with inflation now here and real, the moment of truth has come requiring intervention in the way of tighter fiscal and monetary policies. A free kick or two for the other side, if you like.

The question still remains though whether governments and central banks have the balls to effect the policies that might restore some semblance of rationality in global markets, because it is without doubt that the vast majority in this world have lost their minds.