The Inflated Stock Market and You

The U.S. Congress is in the process of approving a new stimulus package designed to counteract the damage from the COVID-19 pandemic. Pledging to spend $900 billion on stimulus checks, unemployment benefits, and other perceived benefits for both companies and the American people, this deal is set to help people get through the late stages of this practical nationwide lockdown.

If this bill would have emerged a year ago, it would have been the most expensive spending bill in American history. But of course, that record was set by the $2.2 trillion stimulus package passed by Congress in March 2020.

Economically, the country seems to be doing just fine. Most analysts and even average consumers look to the health of the stock market as a kind of barometer for how the country is doing financially. And the stock market is doing quite well, reaching new all-time highs.

But wait -- the economy is doing horribly, at least on paper. Unemployment is still unbelievably high. Imports and exports are practically shut down. Millions of small businesses have closed permanently as a result of the pandemic. We’re still struggling with the damage from nearly a year of lockdowns. And on top of all of that, the virus is still circulating. The damage is still being done.

And the stock market is still growing.

The Dangers of Stock Market Inflation

This isn’t good news. Stock prices may be going up, resulting in short-term gains for investors, but the long-term economic damage is hard to even imagine.

The reason for the irrational upward momentum in price is supreme confidence in the government’s irresponsible actions. The Federal Reserve interest rate remains near zero, allowing big banks to borrow endless money and continue taking advantage of average consumers. Government spending keeps increasing (despite the U.S. being in a staggeringly insurmountable debt). And in the wake of a financial disaster, the government’s response has been to spend even more money and put us even more in debt.

The setup here has no happy ending. It could lead to a stock market crash that would put the 1929 market crash to shame. It could lead to a period of slow decline that lasts for decades. In a worst-case scenario, it could ruin the United States as an economic powerhouse as faith in our institutions weaken on a global scale. And in a best-case scenario, stock prices will remain high, and we’ll face the dangers of economic inflation for years to come.

No matter what, the American people lose.

The Best Solution

The best solution here would be unpleasant in the short term but healthy for the economy in the long term. Abolishing the Federal Reserve, cutting all forms of government spending, eliminating governmental cronyism and favors to big banks and other major corporations, and improving free market dynamics (including ending the lockdowns) would be a good start. But of course, that’s probably not going to happen in our lifetimes -- and no individual has the power to motivate these actions alone.

How to Respond as an Individual

Instead, your best course of action as an individual is to brace for the potential fallout of these careless economic decisions.

For example:

  • Invest in different assets. You may not want to pull out of the market entirely, but you should consider investing in different types of assets. For example, you could invest in rental property and hire a property management firm to make a reliable stream of passive revenue.
  • Invest in gold and silver. If you’re really concerned about the economic future of this country, you could consider investing in assets that are likely to survive even the worst financial crash: precious metals like gold and silver.
  • Consider other countries. If you’re troubled about the decisions made by the United States, you could consider moving to a country with a better economic and governmental system. Alternatively, you could invest in their currencies and best companies as an alternative to the domestic stock market.

In the meantime, it’s a good idea to voice your opinion to your representatives. Tell them that you’re concerned about the financial future of this country, and that you don’t want your kids and grandkids to suffer from the irresponsible decisions we’re making now. One voice may not make much of a difference, but if a growing number of people press for this, we may make an impact.

It’s a near certainty that the stock market has been artificially inflated to its current state; prices are way too high, and they keep rising despite nothing but bad economic news. A crash, a depression, or a period of radical inflation could be in store for us. Act now if you want to avoid the worst effects.

Image: Quoteinspector