Why Government Regulations Might Force Stocks and Consumer Prices up in 2022, even if interest rates rise – January 3, 2022,
Currently, there doesn’t appear to be an appetite to pull back on much if any government regulations, which equates to prices being forced upward in the marketplace. Stock prices that fluctuate could see some periodic pullbacks, but the cost to participate in this new heavily regulated economy is getting rather pricey which equates to fewer participants.
Fewer participants in the marketplace with or without price controls force cost upwards. One of the complaints most people have about a free market economy is capital appreciation which is rarer to come by in a truly competitive marketplace. a person with a low financial IQ will find it difficult to build wealth in an environment in which they’re working for fixed prices.
When prices are stagnant one way or the other, there will be calls from people to ask the government or some central authority figure to do something about it. Although I’m a believer in free-market capitalism, I do live in the real world and the average greedy and entitled person doesn’t imagine themselves as greedy and entitled, instead they imagine that some person over there who is getting ahead faster than they are should be punished by the government.
This flaw in the democratic process which allows the government which is the new ruling class to redistribute money to people who don’t deserve reaches its peaks when government rules and regulations are too socialized. We’re in an era in which Democratically elected politicians will do and say anything to get positive press coverage, meaning that politicians themselves have become SNOWFLAKES! The people are usually a reflection of the people they elect and it’s for this reason why in the modern era, austerity measures aren’t even being considered.
If you understand socialism in Latin America, you’d know that even in the event a Conservative politician is elected, austerity measures will immediately fuel a Leftist uprising, primarily because financial education is not common in Latin American countries. Government Welfare makes financial education a relic of a distant past and it’s for the reason, why currencies controlled by governments are debased to serve the interests of the democracy.
The wealth effect which I like to combine with inflation in all PRICES for whatever reason tends to calm people down. I got a pay increase yes the things I consume cost more, but I got a pay increase and maybe I’ll just spend fewer dollars? This economic deflation caused by consumer price inflation has led to higher stock market prices.
Now, most people who invest in stocks tend to look at things like real estate only for their cashflow properties, well higher interest rates are most likely going to hit people in debt the hardest, and what I could see happening is rates rising and holding steady in fears of more inflation because raising interest rates in this regulatory environment is NOT going to bring prices down.
Try to imagine all government regulations as a MINIMUM WAGE LAW when you understand that the government has set prices at an amount, the cost of doing business can not come down lower than that amount. What can’t be imported to your country will rise in fiat dollar-denominated value, it’s just what it is, now if a company, can’t adjust to this new reality, you might want to sell that stock, quit that job or buy up whatever product that is likely not to exist in the future.
Until I see an appetite for shrinking government, I will expect to see higher prices!
Interesting times ahead!