How Much Money Did the Fed Dump into the Stock Market?

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Ever since the housing crash of 2008 and the stock market crash that followed, there has been an undeniable trend in our economy. As soon as the Fed began its quantitative easing program, the stock market started to recover. The more cash they dumped into the economy, the higher NASDAQ would soar. To the central planners in Washington, this was a recovery, but to the average citizen it was anything but. Just because the because the stock market was improving, didn’t mean our finances and standard of living would improve with it.

That’s because the stock market has little effect on the real economy. In fact, it’s more of an indicator for the strength of the economy, rather than the cause of that strength, and that fact only counts if it hasn’t been tampered with. The market capitalization of a company is merely the valuation of that company’s ownership, and nothing more. It should (theoretically) go up if that company is profitable, and go down if they are in the red. So if the economy is in the toilet, the value of these companies should go down. Right?

I know it sounds like I’m explaining this to a kindergartener, but it has to be done. The central planners have convinced so many Americans that if they increase the value of the stock market, the economy will improve, when obviously it’s the other way around. By pumping up the stock market with funny money, they essentially built a Potemkin village on a grand scale.

By reducing interest rates to near zero, and reducing the value of our money through inflation, they tried to force our dollars out of our savings accounts and into investments, even though it was spending money we didn’t have and taking insurmountable loans that ultimately ruined our economy. At a time when Americans should have been saving, they were stealing the money right out of our pockets by printing money, and they dumped it into a floundering stock exchange.

But now that quantitative easing is over, it’s time to ask a very important question. Exactly how much of our money was wasted on the stock market? How many dollars went into the pockets of CEO’s instead of the pockets of workers and entrepreneurs?

Byron Wien recently answered that question, at least to the best of his ability, since nobody really knows the true number. He’s an investor and member of the Blackstone Group (who are no saints by the way), and he thinks he knows exactly how inflated our stock market is.

Even though we’ve seen company earnings more than double between 2009 and 2014, there has been concern that the market rally has largely been driven by so-called easy money the Fed supplied through its bond-buying program, or quantitative easing.

Wien quantifies its contribution:

It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. The Federal Reserve was providing this stimulus to improve the growth of the economy, but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low. If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion. You could argue that the monetary stimulus financed the multiple expansion in this cycle.

There are two kinds of people who own stocks. Those who are rich, and those who want to be rich. The Fed essentially pushed $3 trillion into the pockets of people who already have more money than god, and a bunch of wannabe Warren Buffets. Since that money was the product of inflationary practices, it used to be yours. It came out of your bank account and your wallet, and you’re never getting it back. If you ever wondered why wealth inequality is so off the charts in America, now you know one of the reasons.

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Contributed by Joshua Krause of The Daily Sheeple.

Joshua Krause is a reporter, writer and researcher at The Daily Sheeple. He was born and raised in the Bay Area and is a freelance writer and author. You can follow Joshua’s reports at Facebook or on his personal Twitter. Joshua’s website is Strange Danger .

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  • Joe Lizak

    “They essentially built a Potemkin village on a grand scale”. Is that right next to Greenich village? Do they get the Village Voice? Fabulous!

  • Nexusfast123

    Statistical analysis shows that a small percentage of the population own stocks of significant value. The vast majority of which are through inheritance. No one is stopping you getting into the ‘market’ as a retail investor and get exploited by high speed trading.

  • Nexusfast123

    Massive transfer of wealth to a small percentage of the population. QE has decimated savers a transfer of wealth in this way rapidly impoverishes existing wealth holders (savers).

  • Shiva

    now you know why the top bankers are committing suicide
    money is face has been from the 30’s
    https://www.youtube.com/watch?v=Pl305N56CGY

    • It was broke when it was created in 1913. Its “assets” are other people’s debts.

      • nimbii

        Yes!!!

      • Shiva

        if you want to get technical about it

        Historically, many societies have used cowries as money, and even as Metal tool money, such as knife and spade monies, was also first used in China. At this time, guidelines were made to allow for a non-inflationary
        February 3, 1690, the Massachusetts Bay Colony issued the first paper money in the U.S., in order to pay for its war and the taxation in the United States begins with the colonial protest against British taxation policy in the 1760s just as State and federal inheritance taxes began after 1900, while the states
        (but not the federal government) began collecting sales taxes in the ”
        1930s.” The United States imposed income taxes
        briefly during the Civil War and the 1890s, and on a permanent basis
        from 1913. There have been no export taxes, taxes on trade between
        states, or taxes on charities and religious bodies, and no value added
        tax. from the 1930’s the Federal Reserve is broke

        • What was the Federal Reserve Note backed by before 1930?

          • Maddog

            The American people’s labor.

          • Since the United States government declared bankruptcy in 1933, it is now backed by you and everything you possess. We are the collateral.

  • THat last sentence describes the experience of the vast majority of people who invest in stocks, because it is a casino more than an investment. Even their own numbers prove that the majority of the money invested in the stock market is lost and winds up in the pockets of wealthy traders, who were made ever more wealthy by QE.

    • unbubbleslayr

      Maybe people should learn how to invest. Wealthy traders obviously have learned how.

      • Wealthy traders benefit from insider information, being insiders. The majority of people who invest in the stock market, like the majority of people who gamble, lose money over time.

  • The stock market is like those slot machines that can be “adjusted” for “looseness.”

    • unbubbleslayr

      The stock market is like slot machines, some have higher pay outs than others and seldom pay out after hitting it big.

  • Jason Brown

    The market will crash at a time, when the government is able to take full advantage, of a major crisis.

  • nimbii

    I’ve wondered about Progressives touting the income inequality mantra and have suspected Progressive QE as the culprit for the Progressive talking point.

    • With the richest 2% in the world owning 50% of the property, it is easy to see who has the most resources to divide the rest of us about income inequality.

      • nimbii

        In their minds, if it divides, it works.

  • tjb323

    I read that the FED did not really stop QE. They just said they did and then continued pumping money. Check out http://www.the great recession blog. For the article.

  • Stop using “their” money and it all goes away. Easier said than done.

  • I look at stocks as a fool’s game and so do many very wealthy people that are teaching me about money. Unless you are on the inside stay away