This is very interesting. Money is apparently being produced right now by banks who lend money to people (and you can still get pretty large loans without collateral - look at how credit card limits have blown out, and linked to mortgage accounts, too - so you're paying 6% here rather than 15% - as the sx has long been going up at better than 6 but not always at 15, this is decisive, I s'pose) to invest in stocks. The only role of this credit is to add value to the stocks that effectively function as security for the credit. As long as banks keep lending, Wall St will keep growing at >interest; as long as Wall St keeps growing at >interest rates, banks keep lending.
This very circular circulation seems theoretically autonomus of anything else to me. Jordan Hayes told me last year that the only indicator worth looking at for market watchers was the supply/demand differential (and narrow economic theory is quite appropriate when you're talking about the home of narrow economic reckoning). The bank/sx circle seems to me to be about theoretically limitless money (to the point where stock-'consumers' invest beyond their 'real' net worth, and therefore are buying beyond their rational consumption sets, and therefore well outside the understanding of any Arrow/Debreu equilibrium economist) chasing demonstrably finite stocks.
There's certainly very little insurance behaviour going on is there? But then, where's the uncertainty?
If that's a tenable picture, where is this likely accumulatus-interruptus scenario? Where's the pressure on Greenspan to hike rates? A lower dollar helps the CAD. And fear of the mother of all tanks is certainly a pressure not to, eh?
Where, in this age of global finance and light-pulse transfers, does LDC economic dissolution impose itself on Wall St? America does not depend all that much on exports (+/- 10%), not as much as the rest of us, anyway - and foreign disasters so far have just lifted Wall St - where starving foreigners mean nought but escaping capital clamouring to get in, fire-sale aquisitions, cheap imported capital equipment and the welcome destruction of incipiently contending capitals. And stock values are the focus of management, not production and most clearly not profitability projections.
I mean, how long must we wait for the vengeance of the LTV? How does it find its way into this robustly insular heaven on earth?
I don't get it!
Cheers, Rob.