The Fed Obsessed Imply 'You Didn't Build That'

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“A lot of people don’t know the blood, sweat and tears that go into being a business owner and the type of sacrifice we had to go through to get to where we’re at right now.” Those are the words of Atlanta businessman Kris Shelby to Caitlin Dickerson of the New York Times. Shelby is the co-owner of Attom, a luxury brand store that was looted over the weekend.

It’s a simple reminder that you entrepreneurs did build that. Politicians so frequently want to shrink the accomplishments of business owners by saying they couldn’t have grown their concept without community help, without others, that entrepreneurial creations are a consequence of many. Nonsense. Where there’s entrepreneurialism that leads to success, the success was preceded by endless amounts of skepticism, massive amounts of work, countless near-death experiences (for the business), on the way to the slim possibility of making it. Entrepreneurs almost by definition “built that” precisely because the definition of the entrepreneur is someone who believes deeply in something that most don’t. Again, you did build that.

This is a useful jumping off point in consideration of a view that’s not limited to any one ideology. The view is that investor exuberance about corporations doesn’t really have much to do with excitement about said company as much as the Federal Reserve has created fake excitement with its rate machinations or “ease.”

Even though the use of “money” always and everywhere signals the movement of actual goods, services and labor (which is why there’s a lot more money flowing through St. Louis than there is in East St. Louis), all-too-many aim to pour cold water on stock-market valuations as the stuff of central bankers somehow throwing around money. And again, this isn’t a left or right thing. Pick up a New York Times and read a Matt Phillips report. Even though he’s supposed to be reporting on stock-market movements, Phillips routinely makes known his view that stock-market rallies are a consequence of Fed action. To Phillips it’s a known quantity that the rebound since late March had the Fed’s fingerprints all over it.

At the same time, readers can rest assured that much commentary coming from those who are part of or associate themselves with the “Austrian School” will conclude the same as Phillips. Some libertarians say the same, that it's all about Fed rate cuts. To the Fed obsessed, market exuberance is a “Fed did it” notion, which is their way of saying “you didn’t build that.” Don’t you know, stock-market rallies are “sugar highs.” Central bankers like Ben Bernanke, Janet Yellen and Jerome Powell have for years been tricking the most sophisticated, deepest markets in the world into fake froth.

Oh well, facts are stubborn things. So are companies. Just as an economy isn’t a blob as much as it’s a collection of individuals, so is a “stock market” a collection of companies. And the valuation of companies within a “market” moves around without regard to what central bankers do. That’s why it’s so odd that so many self-proclaimed free market types buy into the easily disprovable notion that stock-market health is an other concept born not of great companies, but planning within central banks.

So let’s get to the facts.

The view has long been that low yields on Treasuries in the U.S. have created a hunt for yield that could only be found in the stock market. The obvious problem with this bit of simplistic reasoning has been that if market strength since 2009 (or even since March of 2020) had been a yield play, then logic dictates there would have been a correction in Treasuries to reflect a rotation out of government bonds and into the stock market. Except that such a rotation never happened. Not from 2009 until 2020, and not at times like the present as the yield on the 10-year Treasury note sits at 0.650.

And then there’s a global aspect to what has always been a ludicrous discussion. Nations not the U.S. have government bonds too. Notable there is that bonds in Europe and Japan have gone negative. This is important mainly because it’s a way to test the yield hypothesis that has long excited Keynesians, Austrians and libertarians. If low yields on Treasuries have been a lure for investors, then negative yields overseas would be a major lure for equity investors. Except that they haven’t.

While the S&P 500 has risen 350% since March of 2009, the MSCI All Country World Index has risen a comparatively paltry 89%. This is an important distinction mainly because central banks around the world were pursuing the same policies as the Fed in the form of impossible scenarios like “zero” rates of interest, the laugh line that was and is “quantitative easing” too, but there wasn’t near the equity-based exuberance in parts of the world not the U.S.

Some will respond that “negative” yielding securities have been more of a modern thing, so let’s just look at equity returns in 2020. Most would agree that central banks around the world have been operating in frenzied fashion since March (their actions in vain, despite what the Fed-obsessed believe), but during that time the Wall Street Journal’s Karen Langley reports that Stoxx Europe 600 is still down 16% for the year, while Hong Kong’s Hang Seng Index is down 19%. What about the S&P? The Index is down but 5.8%.

If central banks were the source of market vitality as the intellectually lazy persistently tell us, there would have been a uniformity to the performance of equities since 2009, and also since March of 2020. Except that there wasn’t. And for an obvious reason.

Most equity rallies throughout history have been defined by very few great companies pulling up the whole Index. In the U.S.’s case, Langley reports that the recent U.S. rally has largely been a consequence of big technology names like Microsoft and Apple that are up 16% and 8% respectively. Throw in Amazon and a few more, and you have your rally.

In short, great companies drove and continue to drive stock-market strength. If other parts of the world could claim a growing number of trillion-dollar valued companies that are valued highly because they meet the needs of an increasingly prosperous world, then foreign equity indexes would pace with U.S. indexes.

The main thing is that the Fed and other central banks cannot create these amazing companies. Only amazing individuals can create them; nearly always amid immense skepticism on the rocky road up. So let’s stop insulting commercial genius with baseless presumptions about central banks. It’s not true, plus it’s arguably more demeaning than a mis-spoken line (quickly walked back) from long ago from a now-retired politician about entrepreneurs.

John Tamny is editor of RealClearMarkets, Vice President at FreedomWorks, and a senior economic adviser to Toreador Research and Trading ( His new book is titled They're Both Wrong: A Policy Guide for America's Frustrated Independent Thinkers. Other books by Tamny include The End of Work, about the exciting growth of jobs more and more of us love, Who Needs the Fed? and Popular Economics. He can be reached at  

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