What goes up......
There is a very interesting article in the FT this morning about how covid has been brilliant for the world’s billionaires. As governments have poured ever more money into the world’s economy much of it has found its way onto the stock market and the value of the richest peoples’ shares has soared. More money chasing the same number of shares equals higher prices.
This is not that new and it isn’t just covid cash which is to blame. QE is still continuing in most Western economies, central banks are printing huge amounts of money and throwing it into the economic system and have been now for over a decade. It is the new normal and raises little comment but it should. If western economies are so successful and the credit crunch a dim memory why do these economies need hundreds of billions of pounds, dollars and euros to prop them up?
It also raises the important and truly frightening question, what happens when they stop? Asset values seem to have only a passing relationship with economic growth, profitability or even prospects; isn’t this a sure sign of a huge bubble? Will whole economies grind to a halt when the lubrication of QE dries up?
The West may be considerably less wealthy and successful than it thinks it is, propped up by a magic money tree which cannot live forever.
https://jonty.substack.com/