Holiday season coming to an end this week with the US stock markets closing at all time high on the last trading day of 2020. Who would have thought this is the outcome of COVID-19?
A epiphany came to me yesterday that it should not be a surprise. Back in 1987, the first stock market crash the US Federal Reserve had to deal with, it was caught by surprise and reacted to the situation carefully. Back then, the US Fed held the belief that they should not interfere with the free markets.
Since then, every financial crisis had resulted in the Fed reacting to the situations more quickly. And the amount of money being thrown behind each crisis gets bigger and bigger. The belief of the Fed has clearly changed from non-interference to central planning. There is no more deliberation within the Fed whether they should react to a situation or not.
At this point Fed will answer to all major and minor economic issues with automatic money pumping.
But isn’t central planning a “feature” of communism that the United States claims to be the root of all evil?
The Fed sees no consequence from their actions. However, normal people around the world are feeling the consequence everyday. The wealth gap has grown so much many people are now debt slaves. Isn’t this the cause of almost all the revolutions in human history?
What I worry about most, however, is something else. All the past crisis were singular events spaced out by at least 2 to 3 years. They hit the financial system hard but we have time for people to adapt and recover. What if the frequency of these events increases significantly? Would money pumping still work?
Talking about unintended consequence, here is a piece of local news that I am sure this problem is happening everywhere in the world. Kids with no supervision … you really believe they would not cheat?
Here is an interesting read on the work of a mathematician turned biologist. What I liked most is that patterns can emerge everywhere without the participants knowing. Stock market is a prime example – everyone are guessing and many traders just cannot see beyond their own point of view. In aggregate, recurring patterns emerge from their actions.
And this piece makes me thinking … special organizations would definitely create their next generation operatives with no finger print now that someone have figured out the DNA signature.
Taking a break today and will back to normal schedule tomorrow.
Wish you all a Happy New Year!