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Don't Compare Today's Stock Market Ratios To The Dot.com Bubble - It's Far Worse

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EDITOR NOTE: The waves currently tossing the markets may remind some investors of the stormy seas that sank the dotcom investors in the late 90s. But as with any combination of tides, what matters most is not what’s on the surface but the undercurrents. And right now, in no way does the undercurrent resemble the one we saw 20 years ago. The money supply and velocity of money then and now show completely different conditions despite similar market effects. What matters is the longer-term implications. Will the tides pull our economy out to sea, or closer to shore? If this sounds confusing to you, the article you’re about to read offers three illustrations to clearly explain what’s going on, and what may be up ahead.

It is problematic comparing stock market ratios of today …

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to the infamous dot.com bubble of 1995 to 2004.

Why? The Federal Reserve wasn’t pumping trillions into the market.

Look at the red line (Fed Funds Target Rate from 6.5% in 2000 to 0.25% today and the orange line (the massive growth of The Federal Reserve Balance Sheet).

The Fed isn’t trying just a little, but tried so hard. M2 Money Velocity was over 2.0 but is now almost 1.0 with M2 Money growing at 24.1%.

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Can The Fed endlessly print money without consequence? Of course not. We are ka-screwed.

Is Fed Chair Jerome Powell really Vanilla Ice?

Originally posted on Confounded Interest

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All articles are provided as a third party analysis and do not necessarily reflect the explicit views of GSI Exchange and should not be construed as financial advice.

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