Posted on 12/17/2015 5:30:29 AM PST by xzins
Nothing is more bungled in Washington than the role of money in our economy- and that's saying a lot. Almost no one understands how our dollar policy works, and those that say they do are the ones who screwed things all up.
The Fed has today bid farewell to seven years of its zero interest rate policy. Hooray. Wall Street is petrified because investors have become hyper-dependent on this zero rate scheme and the floods of dollars injected into the economy just as an addict craves crack cocaine.
But the high from easy money, just as with any hallucinogenic drug, has been temporary at best and likely damaging in the longer run.
Liberals tend to believe that money creation is a stimulant to the economy and stock market. That's only true, if at all, in the very short run. Over time, prices and output economy-wide adjust to the larger volume of money.
The printing press, alas, is not a job creator. If it were, Mexico and Argentina would be the richest countries in the world, and people would be lining up at the U.S. southwest border to get out rather than to get in.
Thanks to Ben Bernanke, the former Fed chairman and Janet Yellen, the current chief, we have just completed an experiment of epic proportions. Federal short-term interest rates have been set at zero and the Fed has injected dollars into the economy with a more than $3 trillion program of bond purchases through what has become known as QE1, QE2, and QE3, etc.
When the Fed purchases bonds, it releases money into the economy to get them. Bernanke and Yellen contend that this program saved the world economy from a second Great Depression.
They point to the surge in the stock market since 2009 as more evidence that the strategy worked swimmingly.
But what Americans want is growth. What has all this money creation bought us in terms of helping juice the economy, creating jobs, or giving the American worker a pay raise? Nada.
We've been saddled with a limping recovery that to tens of millions of Americans below the median income feels like no recovery at all. Wages have remained almost entirely flat. And growth of 2 percent for this recovery is running well below the normal growth trajectory of 3-4 percent out of recession.
Add to this the $7 trillion in added debt and we've been served up a soup of Keynesian stimulus lunch that has only put Americans in a very sour mood about our financial condition now and in the future.
About $1.5 trillion is missing from the American economy compared to an average recovery (Almost $3 trillion is missing compared to the Reagan expansion) and voters are feeling the ill-effect in their wallets.
Worse, all this borrowing and money creation isn't free. We've tried this before - twice - and both times the story ended badly with a pop of the bubble. The first ordeal was the dot-com crash in 1999-2000 and the follow up was the real estate avalanche in 2008-09.
Both were facilitated, if not triggered, by easy money.
Has Wall Street conveniently forgotten about these multitrillion dollar losses?
Thanks to these bubbles, the average family today has seen no gain in its real net worth since the late 1990s, so it's hard to see how the Fed's policy benefited the middle class.
Why hasn't easy money pumped up the economy? The answer is that Fed money creation can't reverse the effects of bad tax and regulatory policy. We now operate under a policy regime in Washington that punishes investment, risk taking and profits through high tax rates and strangulating regulations -- especially aimed at our energy producers, our investor class, our banks, our drug companies, and our health care providers. Profits at Walmart or McDonalds are now denounced not as a sign of success but of greed.
We haven't come close to the normal rate of investment that we would see by businesses in a recovery - as even Hillary Clinton has acknowledged.
Why? Obama raised the investment taxes on dividends and capital gains by almost 60 percent.
We've seen more part-time workers and lower overall employment. Obamacare rewards companies to cap hiring at 49 workers and to pay those they do hire for less than 30 hours a week.
Dozens of major American companies are leaving for Ireland, Canada, and Europe. Corporate tax rates are much lower there than in the United States.
Companies are parking their earnings abroad to keep their profits out of reach of an IRS that wants to penalize them if they bring money and jobs home.
Our coal mines and coal companies are shutting down thanks to EPA regulations that are killing low-income areas like Appalachia.
Pharmaceutical companies face absurd regulations that can lead to delays in getting experimental life-saving treatments to market while costing firms hundreds of millions of dollars.
Small banks are getting swallowed up by too-big-to-fail big banks thanks to Dodd Frank rules, which Hillary Clinton now pledges to expand on and to veto any sensible reforms.
The Left's latest crusade is to establish criminal penalties and jail sentences for CEOs who unwittingly violate Uncle Sam's byzantine securities or environmental laws.
The "you didn't build that" hostility to America's small, medium, and large businesses is an economic poison pill that has placed our nation's employers in a holding pattern.
It was always a canard to believe that printing money would pull us out of this slow growth swamp we are wading through.
Micromanaging the economy through the lever of money creation at the grand fiefdom within the Fed doesn't work and that should be the enduring lesson of the last seven years' failed interventionist experiment.
*Stephen Moore is an economic consultant with Freedom Works and a CBN News Economics Contributor.
From the article: “The printing press, alas, is not a job creator. If it were, Mexico and Argentina would be the richest countries in the world, and people would be lining up at the U.S. southwest border to get out rather than to get in. “
But, but, all the major averages closed up yesterday and markets all over the world are rallying this morning, according to CNN.
A couple of more increases and I’ll be able to retire.
/sarc
Looks like we’ll have a Republican President, time to to tighten it up.
Here’s my proposition:
The worth of fiat currencies is a hope phenomenon, and the volume of the currencies is not nearly as relevant to their real unit values as the level of hope.
Now it makes no sense on a worldly level that with such horrible mismanagement in the USA as we have had, that there would be actual hope. Oh, it talked “hope and change” but the change was for the worse not the better. Shouldn’t that be torpedoing hope?
Here’s where we might be seeing a “God works in mysterious ways” phenomenon, IF a revival is at our doors. Perhaps the Lord has already announced something to many souls, but the devil has jumped ahead of the parade to try to claim the glory.
Or maybe this might be a wild, utterly wrong guess. But I’ve seen very good spiritual explanations of many things lately. For whatever it’s worth. To God be the glory.
Me, too! lol
Bu,bu,bu... butt what about the petrodollar scam that landed us in bed with the Saudis?
Word is that core inflation is already at 2%. 4 increases this year will get the funds rate up 1% and cause more inflation. At some point, it can’t make sense to loan money at a rate lower than inflation. Right? Am I missing something?
Mexico and Argentina aren’t at the top of the pyramid in the fraudulent global faux-economy. Russia, China, the Saudis, all depend on our printing presses to prevent absolute chaos from breaking out. All of their vested interest is in our presses continuing to roll.
We could run them forever with little consequence IMHO.
The thing about the phenomenon called hope is that it transcends what we know as worldly sense. It looks ghastly on the national credit card, but nobody seems to be caring.
The way I understand it, both the devil and God can deal in hope. The devil will deal with it to try to lure people into destruction. God will deal in it to give people advance assurance of what He is about.
But if the two go toe to toe on the same turf, God will win. And if, big huge IF, this is what is about to go down in history, God won’t have a problem focusing the USA on a way to pay off that national credit card.
It’s very intriguing to me. I’ve personally been very sensitive to issues of despair and hope. I’m not taking any antidepressant pills, smoking no marijuana. I think I see hope coming down the pike. Call me wrong if you want, but that’s what I see.
We could run printing presses forever? I don’t understand. Can you explain? (Did I misunderstand?)
As a believer, I certainly believe in an ultimate Hope.
But for THIS current situation, I’m not getting the sense that you are that this is on the proper trajectory to salvage this nation.
Interesting observation... the hope phenomenon factors in again, IMHO.
I don’t see this actually happening. I believe God will cause the worldly situation to sync up with the spiritual one, sooner or later. It would be a bad witness in a blessed age to have a huge debt, and God would arrange a way to wipe it out.
All VERY VERY much IMHO. I do not have a crystal ball. Maybe there is a mountain of blessing ahead that I do see but also a humongous pothole that I don’t see.
I think the overall lesson should be to put our hope in God and do what we can in the meantime, even if we feel like the Dutch boy who put his finger in the dike. God will bless people who pursue and accept small graces with gratitude, with larger graces. Not so much those who wallow in a chosen despair.
It isn’t such a trajectory, at least not as man might plan it.
God has a different M.O. and it really isn’t a big secret; it’s in the bible, C. S. Lewis has talked about it at length, &c.
Powered by sin, man digs himself a huge hole and eventually hits a rock bottom, and then inevitably discovers that God is the rock at the bottom. Rinse, repeat, till end of history and all that is left is the sinful dregs who will never believe.
Now perhaps by mercy the rock bottom might not be a SHTF bankruptcy this time around. It might be things like crime and terrorism and balkanization. The point to it is that it becomes crystal clear that some important affair is careening out of our control, and we end up shouting desperately for God, and being gracious always, God answers the shout.
It’s like a card game where everyone keeps drawing a crappy hand. No one is going to call because he thinks his hand is the worst at the table.
It could go on forever. No one is going to call us on our printing or our debt because their situations are worse.
A quarter point is nothing. If that is their showing of the confidence of our markets...we’re in trouble. It was merely a political move to shore up Obamas dismal handling of the economy. There will be no improvement until the question of 100 million idle workers being paid to sit on their collective asses by the American taxpayer in one form or another is answered. Cut off assistance...and things could improve.
Kind of a point to that: people living in glass houses aren’t inclined to throw stones...
At least until someone goes crazy and throws stones anyhow.
The US had long been the hope of the world, even if the pride of other parts of it distorted that recognition. Now we’re watching the proof.
OK. You are NOT saying it will be good. You’re just saying they’ll continue doing it. Thanks for the explanation, Buckeye McFrong.
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