Our economy is weak, not strong. It has been exhausted by massive government and its idiotic policies. True wealth is not created or expanded under these circumstances. Wealth and the standard of living are shrinking. Wealth may be shifting hands from one group of people to another, but it is not growing. Nor can it until government is stripped of much of its size, power and regulatory excesses.
Whether markets continue to recover (appear to recover is more proper) is anyone’s guess. A hyperinflation, should it occur before a hyper-deflation could push the Dow over 20,000, but would the rise only reflect a deterioration in purchasing power? A hyper-deflation could push the Dow below 10,000, a likely unthinkable level for too many market participants. Were it possible to neutralize inflation/deflation, I suspect the chances of going below 14,000 from here are greater than the chances of crossing 20,000. If monetary effects on asset prices could be neutralized, that is a bet I would willingly make.
In today’s world, neutralization of inflation-deflation is impossible. Government has every incentive to continue to inflate financial asset prices as it is the only thing left that they can fake. Their ability to engineer an economic recovery ended a few years ago. The only question is whether they can continue to create financial asset inflation as their smoke and mirrors cover.
Read the rest here...