Asset Prices & Monetary Policy in an Irrational World - Whalen

The explanation for this remarkable divergence between stock prices and the underlying performance of public companies lies with the Federal Open Market Committee.  Low interest rates and the extraordinary expansion of the Fed's balance sheet have driven asset prices up by several orders of magnitude above the level of economic growth...

Stocks, commercial real estate and many other asset classes have been vastly inflated by the actions of global central banks. Assuming that these central bankers actually understand the implications of their actions, which are nicely summarized by Greenspan's remarks some 20 years ago, then the obvious conclusion is that there is no way to "normalize" monetary policy without seeing a significant, secular decline in asset prices.