Why the Fed Loves the Current Stock Market (bubble) Rally: The Early 90's All Over Again?

If you are currently paying even a small amount of attention in regards to the U.S. stock market and dollar index , you might be wondering three things. 1) why isn't inflation becoming noticeably rampant given the amount of monetization of government debt and "printing" of new money by the Federal Reserve - little overall upward movement in the consumer price index (CPI), 2) how anyone, let alone "experts" in the field of economics, can be suggesting that a falling dollar is a good thing for the aggregate U.S. economy (and stability), and 3) if the dollar is falling as drastically as it is why is there a stock market rally?

Dr. Mark Thornton shows here how in many cases easy money (the Fed's manipulation of interest rates) first leads to asset bubbles, such as real estate or the stock market, before ending in an inflated bust. Moreover, the inflationary result of the easy money is what generally leads to the bust - a necessary rising of interest rates.

Money that is tied up in an asset bubble initially prevents monetary inflation from being revealed as price inflation as measured by the Consumer Price Index. However, if the monetary pumping is used to purchase assets like stocks, bonds, or real estate then the inflation is revealed in the price of those assets, which will rise even though the underlying earnings of the assets has not improved (emphasis added).

We appear to be witnessing a new asset bubble in the making, this time (again) in the stock market. Much like in the early 90's when interest rates were manipulated lower by the Fed, the ensuing result was the stock market tech bubble -- ending in 2000. And as soon as more investors enter the picture, and more profits are taken off of the table and placed in the consumer markets we are likely to begin experiencing that expected inflation. The question du jour then is, is the Fed continuing to keep interest rates artificially low in attempts to first pay back some friends on Wall Street?