The above is a chart I found over at Jesse's Cafe Americain, a good blog. It shows how the current equity rally is been dirven by monetary inflation that is not finding its way to the real economy, but to asset markets. As a result, the S&P500earnings multiple has risen to the highest level ever. I suppose if you can have a 'jobless economic recovery' you can easily have an 'earningsless bull market'.
I believe that inflation is always a monetary phenomenon. The chart suggests that we are at the midst of an asset-price inflationary bubble, while the real economy remains in a deep deflationary hole.
ReplyDeleteCould both inflationists and deflationists be right at the same time?