Throughout 2007, when the stock market reached its previous all time high in October of that year, the adjusted monetary base of the United States was very stable and averaged just $851 billion.
During the financial crisis month of September 2008, however, the base leaped up from that vicinity between September 10th and September 24th to $949 billion, and by Thanksgiving 2008 had skyrocketed all the way to $1.5 trillion, near which level it remained even as late as March 2009, when the stock market plummeted to its historic lows since 2002-2003.
The increase in the monetary base was a whopping $718 billion, most of it in response to bank failures and panic on Wall Street during a narrow window of two months in the fall of 2008, but the stock market tanked 56% from the October 2007 highs anyway by the following spring.
Now FoxBusiness is arguing, here, that the increase in the monetary base from March 2009 to today, $1.3 trillion, is somehow responsible for "juicing" the stock market's remarkable 134% rise since that low.
Nevermind the stable and relatively low monetary base had nothing to do with the 2007 highs, nor did the rapid expansion of the base by $718 billion forestall the dramatic collapse of the market in 2009, but FoxBusiness wants you to believe anyway that piling up the monetary base since March 2009 by $1.3 trillion is the reason the stock market is at its lofty heights today, $11.2 trillion higher in total market cap than in March 2009.
That's embarrassingly wrong. The expansion of the monetary base has been irrelevant to the stock market, but it is an important part of keeping the banking system solvent, which is what this entire episode has been about but no one really wants to discuss anymore even as the velocity of money makes new lows, for the obvious reason that if the banks go under, everything goes under, so ixnay on the anksbay, OK?
