I happened upon this r/askeconomics post that hasn't been answered.
So, where does all the Fed money go if it isn’t trickling down to labor markets and consumers? It is being reinvested in financial assets, inflating their value. This explains why we are facing record unemployment not seen since the 1930s, but yet equity valuations are now higher than they have been at any time over the past 15 years.
Reed College. Bachelor's degree. Economics and Philosophy
Yale University. PhD. Economics
Supervised by James Tobin
'A Disequilibrium Model of Inflation and Unemployment'
Originally set to expire on September 30, Treasury Secretary Steven Mnuchin said on Tuesday it would extend its suite of lending programs to businesses, governments, and individuals to the end of the year.
However, Frank said the Fed's purchase of junk bonds has distorted the market economy because "the problem at the moment is that risk is not calculable."
"Pouring liquidity into the markets to raise stock prices or trying to change the risk premium on relatively high-grade junk bonds by a modest amount does not help get funding to the shut or partially-shut restaurant on Main Street," he said.
Education 1985: DPhil economics, University of Oxford
1982: MPhil economics, University of Oxford
1980: BA economics, University of Cambridge
What is driving markets is a bet investors believe they can’t lose: They win if—based on the notion that stock markets can see past the short term—the economy quickly returns to normal; they also win if it doesn’t, given that the U.S. Federal Reserve has repeatedly demonstrated that it is both willing and able to backstop markets. After all, what is more reassuring than a buyer with a seemingly endless appetite and a money-printing press to boot?
At 0:11 of this CNBC video on Jan 5 2016, former Dallas Federal Reserve President Richard Fisher said
These four contradict Paul Krugman who said "I don't think the Fed has really driven up valuations so much as it has...It's avoided a plunge in valuations." And "whether the subsequent rise has much to do [with the Federal Reserve's stimulus starting Mar 23 2020], I don't think so.". Who's correct?