The current problem is that as risk aversion subsides and liquidity preference becomes more normal, the entirely abnormal liquidity balances sloshing around in bank and money market accounts have begun to be deployed by business and individuals.Thus far, most of these deployments (and the attendant acceleration of monetary velocity) have been directed to the purchase of investment goods, causing the prices (and volumes) of assets as junk bonds and stocks represented in index ETFs such as SPDR S&P 500, PowerShares QQQ and SPDR Dow Jones Industrial Average to rise. By contrast, relatively little of the excess liquidity in the financial system has flowed into the real economy to stimulate the production of goods and services.
The Fed's Jedi Mind Trick
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts