Long ago, before stock markets were the only manipulated "proxy" for where the economy should be, if not where it is, and as a result confidence in the outlook for the economy was the only "fundamental" metric that mattered since everything else was, is and will be imploding (and how would it not, when it is the same market central planning that is destroying the underlying economy), there was at least some pretense that fiscal policy was as if not more important than monetary policy. The days when pretending it is not all about credit money creation are now long gone (perhaps the only good outcome from the second great depression), just as the Fed has, courtesy of global open-ended QE, finally admitted it was all about the Flow, not the Stock, destroying decades of central bank canon in the process.
One amusing side effect of this shocking (to some) realization, is that politics, and the entire fiscal process, has effectively been rendered obsolete, and politicians are now nothing but figureheads in a central banker world. Perhaps, the general public would be angry if it were to realize that the only entity left making global macro economic decisions is a private organization run by academics, who in turn are merely firgureheads for the world's private banks. That, however, would entail that the co-opted media would actually explain to the broader population just what is going on behind the scenes: a process that would entail the loss of core advertising revenue, which is why expect confusion about just who pulls the strings to linger for years.
But what is most amusing, is that politicians, now completely powerless to attack their adversary's policies in the hope of gaining political brownie points and incremental votes as those same policies are meaningless in a world in which the only thing that matters is if Central Bank X will inject another $YY billion next month, are only left with resorting to such hilarious attacks on whether or not the market is in a bubble.
Case in point Japan, where the now-opposition, Democratic Party of Japan, was left to debate on prime time TV with the ruling Liberal Democratic Party whether or not stocks are in a bubble.
As Bloomberg notes, "fluctuations in Japan’s stock market that pushed the Nikkei Volatility Index to a two-year high last week signaled a “bubble,” Mitsuru Sakurai, policy chief for the main opposition Democratic Party of Japan, said on public broadcaster NHK’s “Sunday Debate” program today."
Of course, with one party forced to resort to such cartoonish allegations as whether or not 30x P/E is indicative of a bubble, the only logical response is just as childish: the market reflects the outlook for the economy.
Ruling Liberal Democratic Party policy chief Sanae Takaichi countered by
saying Japan’s economy is responding to efforts by Prime Minister
Shinzo Abe to stimulate growth.
Uhm, no it doesn't, as otherwise the US economy would be growing at between 4 and 8%, and not plunging the unchanged line every quarter, and forced to resort to such cheap gimmicks as including intangibles in the definition of GDP.
But never let facts get in the way of propaganda.
So here is a good sample of what political discussion will look like going forward: the political party in opposition saying there is a stock bubble...
Sakurai on Market Turbulence: “What has been behind the recent stock rally has been large inflows of hot money. As the real economy has not caught up to speed, it may be signaling a bubble. The lives of people, especially those on pensions, are becoming more difficult as import price increase.”
... while the ruling party saying there is no bubble.
Takaichi on Stock Movement: “Stock gains in the first few weeks of May had been rapid, so investors were waiting to take profits. I think more money will start to flow into the economy and exports will increase toward summer after the approval of supplementary and fiscal budgets. There are those who may be worried about the recent movement in stocks, but I think we will start to see more signs of strength in the economy as we can see large increases in car sales and construction. Companies that cut costs and overcame long periods of deflation and yen strength are being evaluated properly.”
Of course, in a world in which every G-7 central bank is injecting unprecedented amounts of liquidity into the stock market, the discussion of whether there is a bubble is complete moot: there has never been a liquidity bubble as big as what has been created now.
However, with a tiny portion of the population delighted by soaring stocks, and everyone else enjoying the largely meaningless paper increase in their retirement accounts (because if indeed stocks surge for fundamental reasons, than the coming inflation will destroy all funds locked up in long-term retirement accounts), the argument will be dominated by the party that is urging for soaring stocks, until obviously the bubble pops, and everyone who listened to the lies is left with nothing, and the opposing party (in some cases with a nationalistic aftertaste, just see Greece, Italy and the UK) soars in the polls.
Perhaps the most curious consequence of this confluence of monetary and fiscal (non) policy, is that very soon, political winners and losers will be defined only by where the stock market is, and how far it has or will crash.