Posted on 05/12/2021 12:55:22 PM PDT by Diana in Wisconsin
Despite their hollow bleatings about 'doing all we can to achieve full employment', the Fed's policies has been Kryptonite to employment, labor and the bottom 90%--and most especially to the bottom 50%, the working poor that one might imagine most deserve a leg up.
As wealth and income inequality soar to new heights thanks to the Federal Reserve's policies of zero interest rates, money-printing and financial stimulus, the Fed says its goal is to create more jobs. Really? OK, let's look at how the Fed's doing with that.
I've assembled a chart deck to display the consequences of Fed policies on debt, wealth inequality and employment. Recall what Fed policies actually do:
1. Zero interest rate policy (ZIRP) destroyed the low-risk return on savings and money market funds, stripping everyone not in the Fed-privileged rentier-speculator-financier class of safe, real returns on capital.
2. Zero interest rate policy (ZIRP) lowered the cost of speculation by financiers and corporations but left the interest rates paid by the working poor for credit cards, auto loans and student loans at extortionate rates.
3. QE--quantitative easing--creates trillions of dollars out of thin air to buy U.S. Treasury bonds, enabling no skin in the game federal spending and funneling trillions of dollars of nearly free money into the soft greedy hands of the rentier-speculator-financier class, not into the real economy.
4. Both ZIRP and QE incentivized borrowing low-cost billions to speculate in assets, inflating unprecedented debt-leverage-driven assets bubbles which have now infected every asset class: The Everything Bubble.
Here is the Fed policy in a nutshell: working, saving and prudent investing--you get nothing. You're already rich, borrow huge sums and leverage up speculative bets--you win big. Recall that the rentier-speculator-financier class has no skin in the game because the Fed and other agencies rush in to bail out all their losing bets, while the bottom 99.9% are left to twist in the wind should they foolishly follow the billionaires into risky bets.
In the world the Fed has created, work is for chumps, the way to get rich is borrow, leverage and speculate.
Note that this chart deck is from the Federal Reserve database except for one chart from the Washington Post.
So what are the consequences of Fed policies on debt, wealth inequality and employment? Let's have a look.
I agree... hold on tight.
But, not on precious metals. Any downturn of *physical* gold/silver is a buy opportunity.
BTC? Going to $0.
Stocks? Will be a significant downturn... but will have a ‘slow’ recovery.
If you can sell stocks, have cash, even still have BTC or any non-precious-metal backed crypto, use it to buy physical PMs. (note: there *are* some precious-metal backed crypto’s)
First of all, investment to an economist results in increased production. Investment to this clown is an exchange of paper assets. Second, very little of the “chart evidence” has much to do with the Fed. Rather, it is business reaction to the stated intent to raise corporate taxes. The impact of Biden’s tax policy started impacting the economy the instant it fell from his lips. It accelerated when he took office. The pull back fell off a cliff when business saw the country was being led by someone who has no clue what he’s doing. The gas shortages on the East coast right now would be nonexistent if stupid Joe had left the Keystone Pipeline intact and not threatened to pull offshore oil leases.
No, the Fed can pull on a string but it can’t push it. All of this downturn is squarely on Biden’s and the Democrats shoulders. And anyone who thinks the Pandemic produces wealth is kidding themselves. Killing the Keystone Pipeline did help Buffett since he owns the only rail line that services the ND oil fields. Oddly, he was a huge contributor to BIden’s campaign. You don’t suppose...
Is there a “free market” in anything any more?
Reagans trickle down “for all” (simple across the board tax cuts) do not work. So we are told.
What works is trickle down for the “elites” like Warren Buffet, Jeff Bezos, Elon Musk, Bill Gates, Bloomberg, K. Griffen, and Mark Zuckerberg, all Democrats BTW that do very well under liberal economic policies because of government-corporate collusion essentially.
What the poor and the self perceived downtrodden in America voting for the Democrats do not realize, is that this is in reality the party for the elites, of white men that employ largely brown slaves like at Amazon.
It is ironic. But if the masses are stupid enough to not see this and go along with it, that’s on them.
raising taxes on businesses (income tax and tax on profits):
--negatively impacts aggregate productive expenditure, which is negative for aggregate demand for labor, which is negative for average real wage rates
--negatively impacts aggregate productive expenditure, which negatively impacts aggregate demand for capital goods, which is negative for production and supply, which increases price level, which is negative for real wage rates
--decreases wage share of consumption which means increased inequality
raising taxes on the rich:
--redistribution punishes producers and rewards parasites
in point of fact, trickle down does work. Rich people buy stuff. Someone has to produce that stuff. Whether its cheeseburgers or 400 foot long yachts doesn’t matter. Without that spend there are less jobs. If rich people sat at home all the time and only played the market and video games, it would be different. But every time they buy a product or service they are contributing to that trickle down effect. And if you consider the amount of money a 400 foot long yacht costs and the number of people employed to build it, its not an inconsequential amount of money or employment.
Historically trickle down has been meant as rich people starting businesses and employing people. There is a much bigger picture than that. Rich people don’t just let their money sit in a bank gaining a few percent of interest. They travel. they buy expensive things. they eat expensive foods. they waste money gambling. All of these things employ large numbers of other people, who may not be employed at all were it not for those rich people.
Here is an example- Melinda Gates rented an entire island for a month, spending 180,000 dollars to do so. Although she didn’t start a business, she certainly is employing a large number of people (maids, chauffers, cooks, pilots, guards, etc.) with that spend.
The difference is that today most of these government programs, even this so called infrastructure bill, operation warp speed... make sure Pfizer makes 36 Billion in net profits this year, or that Elon Musk gets his green subsidies again for building electric cars, or that Jeff Bezos can sit on 186 billion and pay 1.25% taxes... while lecturing folks that a tax hike to 30% is a good idea because everyone should pay “their fair share.”
The average person, the so called middle class, does not sit at the table when they draft up Obama Care, a few academic egg heads, bureaucrats and the insurance companies do.
The problem with almost all government regulation/legislation is that it is written to benefit government and a few influential/powerful corporate interests, i.e. Keystone pipeline is struck down to benefit Warren Buffet and BNSF railways.
The difference between what Reagan did and and the crap you have today is that Reagan made the fruits of labor, the benefits of a growing economy and increases in productivity available to all by cutting taxes, i.e. more money in your pocket for everyone. What you have today is essentially corporates-government collusion and the rich getting richer, the middle class shrinking, and the poor getting poorer, at the very hands of those people that talk about equality, social justice, and how they will solve poverty and every social ill with another government program.
You see, where your argument fails, is that you can have 3% that are ultra rich, 15% that are doing OK, and 82% that are poor but still have a high GDP, high productivity, low unemployment... That is exactly what you see in many very socialist countries BTW (today as in China, Mexico, etc). Go South of our border into Mexico and you’ll see folks working their ass off, some even skilled labor, and poor, and contrary to how people imagine Mexico to be, you also see about a 3% elite that are among some of the richest people in the world: https://moneyinc.com/richest-people-in-mexico/#:~:text=The%2010%20Richest%20People%20in%20Mexico.%201%201.,Gonda%20de%20Rivera%20%E2%80%93%20%246.8%20billion.%20More%20items
That is what is happening in America. The middle class is shrinking, the poor are getting poorer, and a government that is getting bigger and bigger, promising solutions is actually the culprit.
***Every regulation they make, every law they pass, every spending bill, added line of tax code really only takes into considerations the interests of a small few.***
***Reagan/Trump did it by cutting taxes and regulations,*** today it is done with government spending:
https://en.wikipedia.org/wiki/Reagan_tax_cuts
What was the economy doing until Covid hit? GDP, unemployment, DOW, real net wages even inflation adjusted? When you cut taxes, you put the money into peoples pockets. When you have government spending on green programs, you give $5 billion for Tesla in subsidies, the entire Musk family with jobs and becoming billionaires, and a middle class pays for it!
Let’s say one of the political parties wanted to create a society where a few wealthy people ran the entire government, and the majority of the citizens were dependent on the government for their financial well-being. What sort of policies would they enact that would get those results?
This is an EXCELLENT response to what i posted. Wish I saw these kinds of responses more frequently. Keep up the good work- you actually succeeded in altering my perspective and thinking in that I am now contemplating the additional factors you point out..
Trickle down does work, and the liberals apply it also!
As to the rich. I have no envy for those like the late Perot, todays Lindell, etc. These people created an empire with their labor, creativity, risk taking and willingness to get back up when they fell down. But people like Bill Gates, Zuckerberk, Jeff Bezos, Warren Buffet, George Soros, Elon Musk do it by manipulating the rules of the game itself. It’s like playing a monopoly game where they get to change the rules in the middle of the game because they have the ear of a governor, senator, mayor, lobbyist, a legal team and the media... Years ago when Bill Gates was selling his 47 cent OS for $109, he was influential enough to stick state and federal law enforcement on kids pirating his software, because we all know, pirating is not a victimless crime!
https://news.microsoft.com/1996/03/21/microsoft-launches-anti-piracy-campaign-in-the-northeast/ (they were doing this much earlier already) he’s powerful enough to get the laws changed, to push for enforcement and have local and federal law enforcement go after this, so that he can maximize his profits.
Do you think it is mere coincidence that MOST of these super rich are Democrats? Why do you think? What did Musk think of Trump rolling back subsidies, what did Warren Buffet think of the Keystone pipeline, what did Bezos think of trade restrictions or tariffs levied on China???
The super Rich are mostly Democrats and sure as hell are NOT true minimalist government conservatives because most play the government-corporate collusion game. They are all about big government because they sit at the table making the rules, receiving the government spending, shaping the visa rules, tax code, etc.
Thank you!
Much appreciated.
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