08 Aug 2011

Why Is the Stock Market Plunging?

Economics, Federal Reserve, Financial Economics, Shameless Self-Promotion 3 Comments

Of course there are specific factors explaining the exact timing–notably the mess in Europe–but I offer a “big picture” explanation in today’s article at Mises.org.

It’s worth checking out just for the charts, which are pretty revealing if you haven’t been following that type of thing.

3 Responses to “Why Is the Stock Market Plunging?”

  1. Martin says:
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    If you want a more fun graph:

    http://research.stlouisfed.org/fredgraph.png?g=1uk

    Monetary base – excess reserves (% change from last year) related to S&P500 (% change from last year).

  2. Major_Freedom says:
    at

    Get ready for QE3!

  3. Joseph says:
    at

    Banks receive extra money when the Federal Reserve increases the money supply, but I don’t see exactly why that makes shares go up. Why would they think that shares were worth more just because they had more money to buy them with? I can understand why gold and other commodities would go up, as these would be seen as safer compared with the dollar? Is this the only reason why shares would go up or is there another reason?