One point from this morning’s post on quantitative easing and big government on which I’d like to expound is the notion that there have not proven to be brakes on the inflation of the stock market.

What I’d sort of expected (and feared) was that, as portfolios inflated their way back to the dollar amounts that they had been projected to hit during the boom, investors would begin to move their investments around.  Some would transition some of their profits toward safer investments to reduce overall risks and protect gains; some would diversify into riskier, more speculative ventures.  Either way, I thought, the inflation of the stock market would begin to seep into the broader economy and make life more expensive.

But as it happens, the gains have been so dramatic, so consistent, and so clearly related to political pressure that (as a group) investors aren’t mixing things up as much as I’d expected.  Maybe at bottom they’re afraid to reconfigure the economy, for fear the money flow will stop.  Indeed, the markets appear to have trained the Fed (and the federal government) not to apply the brakes.  As Andrew Huszar suggested, “We saw this past summer there was this announcement of potentially a taper and the markets actually tanked, and after that the Fed backpedaled.”

Perhaps worse is that people don’t see signs of problems.  Read Mangeek’s comment to the post this morning: “But really, there aren’t indicators in the market that we -shouldn’t- inflate ourselves out of some of the pain.”

The bottom line is that we’re not learning from either history or experience — most profoundly concerning the inability of masters of the universe can micromanage the economy to reduce pain on some without inflicting it on others (and magnifying it in the process).