By IM Vronsky – Re-Blogged From http://www.Gold-Eagle.com
All serious students of economics well know there are several factors that can inflate stock values…and even cause them to soar beyond common sense and corresponding fundamentals. However, there is one factor that dwarfs all others in its disproportionate material effect on pumping up stock prices beyond all historical and reasonable metrics: AND THAT IS EXCESSIVE GROWTH IN THE FED’S BALANCE SHEET.
One must recall that the S&P500 Stock Index suffered a bear market loss from 2007-2008…including the first two months of 2009. During this bear market the S&P500 plunged well more than 55% by the time it finally bottomed in first week of March 2009. Subsequently, the Fed relentlessly pumped up its Balance Sheet…with a view to stem the horrific two year rout in US stock prices.