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Economy on firm footing?!

December 18, 2013

From  Yahoo Finance:

The Dow and the S&P 500 closed at all-time highs on Wednesday after the Federal Reserve announced a small reduction in its stimulus program, confirming that the U.S. economy was on firm footing. The Dow Jones industrial average rose 293.03 points or 1.85 percent, to end unofficially at 16,168.29, a record closing high.

Interesting that the markets would formerly go into a free fall dive at the mention of tapering, but now that they have actually tapered, the DOW rose nearly 300 points to set a new record high. If you accept the above explanation for the market’s exuberant reaction, then it is a reflection of the Fed’s ‘confirmation that the economy is on firm footing.’ Well, that confirms it! The coast is clear and the Fed is standing behind it by cutting their monthly purchase of US debt by $10 billion, from $85 billion to $75 billion. What a vote of confidence!! And this is from the very same monetarists who never saw two of the biggest bubbles in their 100-year history.

Does it surprise us that the Fed can’t identify this current bubble they have created? The very fact that the Fed is ‘confirming that the U.S. economy is on firm footing’ is reason to think just the opposite. Their history of being prescient seems to be nearly 100 percent wrong! Whether what comes next is another financial collapse or the ignition of hyper-inflation is hard to predict, but their vote of confidence is enough to make this contrarian suggest it is time to be extremely vigilant!

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