The Federal Reserve’s monthly buying of $85 billion in bonds (known as quantitative easing), combined with today’s upwardly revised February and March job gains, powered the Dow to a record 15,000.
The Fed’s “massive quantitative easing is clearly driving up stock prices,” said chief economist with Action Economics Mike Englund.
The result, says analysts, is a market mirage that appears stronger than it is because of unprecedented Fed intervention.
“It’s a total Fed-driven stock market,” said chief executive of TrimTabs Investment Research David Santschi.
Indeed, since 2008, the Fed has more than tripled the size of its portfolio of assets to a record $3.189 trillion and promised to keep interest rates near zero until unemployment dropped to 6.5%. Critics say that decision effectively handed banks “free money” to make riskier investments. Dallas Fed Chairman Richard Fisher says the market is “hooked on the drug” of the government’s easy money policies.
“Markets might not like the idea of the drug being withdrawn now, when the Fed holds a portfolio of $3 trillion. But the withdrawal symptoms will be a lot worse once the portfolio grows to $4 trillion, or more,” says USA Today.
The Fed-inflated stock market, however, has done little to ease the pain of Americans struggling in the slowest job-market recovery since World War II.
Today, 12,000,000 people in the U.S. remain unemployed, and 90,000,000 people are no longer in the labor force.