By Michael Every of Rabobank

The Fed's bi-annual Financial Stability Report is making headlines: "Prices of risky assets keep rising, making them more susceptible to perilous crashes if the economy takes a turn for the worse." It also notes asset prices remain vulnerable to significant declines should investor risk sentiment deteriorate, or if progress on containing the virus disappoints. Presumably the latter is why the White House insists businesses proceed with its vaccine mandate despite a court ruling the process be halted: Think of the stocks, man, think of the stocks!

Except, of course, we all know that if stocks slump, the Fed will increase QE again to push them back up, because stocks are what it cares about. FOMC members themselves play the markets and would lose out personally if they let asset-prices crash. Moreover, how did asset prices get to such risky levels? Did a financialized, asset-based economy 'just happen'? I recall Alan Greenspan warning about "excessive exuberance" once upon a time too.