Announcement of Bailout Plans and Bullish Stock Markets

October 17 00:00 2011

New York, October 17 (RainbowNewsLine.com) – Governments and central banks all over the world for the past one month have been coming up with their own version of bailout plans which they claim is good for the economy. The moment a bailout is announced, a stock market upward movement is seen and this is used by Central Banks to justify their act of printing money out of nothing. If you are looking for evidence look at ECB’s and Bank of England’s mega bailouts last month.

True, that the indices go up when a bailout is announced. It always has and it always will. However, that does not mean that the market is bullish. The market is actually fearful. Surprised! How can the market be fearful and the indices go up?

Here is how they do. A bailout is nothing more than printing more money with the assets backing them remaining the same. Hence, each dollar/euro/pound sterling loses value when such an event occurs. The stock markets therefore are adjusting for increased nominal dollars while the purchasing power may be reduced.

Hence one must notice that the day bailouts are announced, the currency market will hit record lows while stock markets rise a little. It is surprising that the media gives little attention to the falling currency market on that fateful day when wealth is redistributed unilaterally.

 

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