If asset prices reflect expectations about the future, the market rising should be viewed with optimism, but there might be less optimism, and there may even be pessimism, about a market that is being artificially propped up by a central bank. What if the central bank can’t print any more money and stock prices drop? And how can all of this money printing be good for the country’s currency?
Referenced in this video:
– Money creation in the modern economy
– Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?
– Open Letter to Ben Bernanke
– Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison
– A General Equilibrium Approach To Monetary Theory
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