Posted by
The Hermit Crab on Monday, May 04, 2009 2:14:36 PM
Many people have commented on what they believe was behind the "surge" in stock prices and market indexes in April. One theory I immediately thought of has been mentioned nowhere that I have seen, so I thought I'd note it here for your consideration.
Personally, I thought the rise in prices was caused by the realization in financial circles that with all of the new, inflationary "pump-priming" of new spending coming through the government's pipelines, we're in for an inflationary period the likes of which few of us have seen in our lifetimes. We may indeed be in for a period like that of Weimar Germany or the Confederate States of America. A wag with brains said during the CSA's 4+ year life that eventually an oak leaf would have the same value as the Confederate dollar. This did happen, but The CSA's Treasury Secretary, Christopher Memminger, had far better excuses that the Obama Administration has for its policies now.
When hyper-inflation hits, the one asset you do NOT to be caught holding is cash. When commodity prices soar, the price of securities is taken along for the ride, but the dollars' purchasing power plummets. I think the buying on Wall Street merely reflects logical investors behaving logically, the way they generally do when they are not being forced to act illogically by government.
Actually, maybe I'd better redistribute my asset allocation in my 401k tonight. The Street may be onto something...