'It is a poor economy when the best investment for a company is to repurchase its own shares. ...What few, if any, economists and financial market commentators understand is that today all markets are rigged by the plunge protection team.'
By Dr. Paul Craig Roberts: The story line is going out that the economic boom is weakening and the Federal Reserve has to get the printing press running again. The Fed uses the money to purchase bonds, which drives up the prices of bonds and lowers the interest rate. The theory is that the lower interest rate encourages consumer spending and business investment and that this increase in consumer and business spending results in more output and employment.
The Federal Reserve, European Central Bank, and Bank of England have been wedded to this policy for a decade, and the Japanese for longer, without stimulating business investment. Rather than borrowing at low interest rates in order to invest more, corporations borrowed in order to buy back their stock. In other words, some corporations after using all their profits to buy back their own stock went into debt in order to further reduce their market capitalization!
Far from stimulating business investment, the liquidity supplied by the Federal Reserve drove up stock and bond prices and spilled over into real estate.