Melt up

The dismal science Economics

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The worldly philosophers

Ben Bernanke Timothy Geithner Vladimir Lenin David D. Friedman v - t - e

Melt up is a term that refers to the general improvement of the value of the stock market not correlated with improvements in the fundamentals of the economy. This usually refers to bubble type movements, where investors buy into an asset because the growth is rocketing upwards instead of fundamentals of the asset, or the result of general inflation.

This term was bantered about after the housing bubble crash due to the credit crunch in 2008. It was an attempt to explain the increase in the market while the unemployment rate still remained very high in 2009 and 2010. It was stated that if the market "melted up" that unemployment would continue to remain steady or increase while the market would continue to rise at the level of inflation. What was not taken into account is that people are panicky creatures and general market fears after a bubble bursts can push market prices of certain assets significantly below "fair value". A recovery in value can occur even without improvement in the fundamentals and is known as a "dead cat bounce."

The recovery was predicted to be a painful one, but unemployment decreased and market levels have exceeded the level of inflation.^{[citation needed]}

Cranks

This term is a new favorite of cranks attempting to explain why their economic apocalypse predictions are in no way disproved by economic improvements. Many cranks like to champion that every investor is just "going along with the herd," while they are brighter than all the sheeple who will get caught in the coming hyper-inflation. This way they can rant "Don't worry, it will happen. Just you wait" as the economy slowly improves and people go back to ignoring them again.

What is really great about those cranks that love to rant about how the "melt up" will eventually implode is that they are the most likely to never invest a dime, even into bank accounts. What eludes them is that greenbacks stuffed into a mattress will be just as worthless as an investment account if there is a total economic collapse, while if it doesn't happen they lose buying power from inflation (at 1-3%) and those invested in market indexes gain at least inflation (usually 8-10%, much more than inflation). In addition there is a risk of some one throwing out the mattress, while accounts are covered by FDIC/SIPC if the bank fails. Every year the economy doesn't collapse they get even more ragingly pissed off at those who invested.