Since the Great Recession, the Fed has transformed itself into an entity more and more responsible for asset prices. This was the stated goal since 2009 as the Fed adopted a new philosophy called the "Wealth Effect." The thinking behind it was simple: growth in asset prices would translate to an increase in consumer spending and hence demand itself. It was a 'trickle down' economic philosophy an increasingly financialized economy.
This backdrop has defined our post-2009 era which stirred certain pathologies that were reflected in the greater culture and politics. It was the time when 'finance became a culture' and actual-productivity plummeted across most developed economies, especially the United States. But somehow in spite of the accumulating dysfunction across most key areas, everything kept trudging along, partly thanks to investors being satiated with record returns.
While the near-zero interest rate regime may now be ending, it is worth considering how much of the water we were all swimming in excused poor state capacity, distorted economic fundamentals, and how it even kept a lid on the dysfunction potentially blowing up in our faces. Now that we have to reckon with these realities, it may be wise to ask how many worldviews were simply products of the the cheap money regime - which is now, in a shock to many, coming to a close. Whether or not it will easily be let go, however, is another matter.
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If someone hates the buyback game then they should look at M and A. Something like 70%+ is unwound within a decade. Turns out Corporate types are generally good at running focused businesses and bad at empire building. GE, Citigroup, Bhc, AIG, ATT with HBO/TimeWarner, Time again with AOL. FB with WhatsApp though ok when they’ve bought other parallel social networks. And on the RD side tell me what businesses Bell Labs or Google or xerox profited from?
Most people think buybacks disappear but they do flow to shareholders who find better ways to invest in vc.
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