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Opinion | How the US Federal Reserve created a financial opioid crisis in the West
- By targeting asset prices to bolster the economy, the Federal Reserve is again creating an asset bubble. The US central bank’s loose monetary policy, more than China, is really to blame for the US’ troubles now
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After Covid-19 lockdowns in March and April, many countries reopened, and people partied to celebrate the end of the pandemic. Now they are being swept by a second wave of infections, with deadly consequences as far as the eyes can see.
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Until an effective vaccine is found, which could be years away, social distancing is likely the new normal. Parts of the global economy, like tourism, will remain shut and others like catering and entertainment must severely reduce their operating capacity. A rebound is unlikely, and the global economy’s capacity might be reduced by 10 to 20 per cent.
The new normal should result in sharply lower profits for surviving companies, as well as widespread bankruptcies (which are probably just being postponed by “helicopter money” from governments). Yet, looking at the financial markets – especially the tech stock frenzy – it is hard to tell that the global economy is collapsing, instead of booming.
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The multi-year mania continues unchecked by Covid-19; Elon Musk, it seems, can make himself richer just by tweeting titillating stuff. These days, so many are talking like Steve Jobs while dressing in minimalist garb; yet, none of them have put out a product as successful as the iPhone, not even close.
With high investment and low productivity, the current tech darlings are looking more like tech Kardashians. Tech mania is now fuelled by star power; knowing how to tease is half the battle.
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