Reckoning for the Fed

Discussion in 'News / Current Events' started by Revmitchell, May 13, 2015.

  1. Revmitchell

    Revmitchell
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    If you queried American citizens as to whether they would support a monetary experiment conducted by the Federal Reserve to stimulate economic growth — an unorthodox approach that would mostly benefit the government, large corporations and wealthy investors at first, but would ultimately help everyone else — would they approve?

    And if you explained that it might take some time to deliver the desired outcome of higher employment at higher wages, and that people in the vast majority of households would have to accept much lower rates of return on their savings in the meantime, wouldn't a few perceptive respondents tilt their heads and ask: How long?

    So why does such a reasonable question raise such ire from former Fed Chairman Ben Bernanke? Responding to a recent editorial in The Wall Street Journal citing persistent low economic growth as perhaps an indication that the Fed's unconventional monetary policies are not working as intended, Bernanke fairly bristled with indignation, writing in his Brookings Institution blog that he never promised monetary policy would be a "panacea" for our economic troubles — and besides, "nobody claims that monetary policy can do much about productivity growth."
    Such defensiveness is not reassuring. It's been nearly six years since the recession officially ended in June 2009. Still, the Fed continues to pursue its zero-interest-rate policy in the name of supporting the recovery, even as the negative aspects of this approach are imposing significant economic costs.

    According to a report issued in March by Swiss Re, the world's second-largest reinsurance company, the Fed's policy of financial repression has cost U.S. savers roughly $470 billion in lost interest income. Other unintended consequences described in the report include "crowding out viable private markets" and "lowering the funds available from long-term investors to be used for the real economy."

    Bernanke's riposte to those who would question the wisdom of perpetuating zero rates is to assert that the inflationary consequences predicted by some have not materialized. But after so much pumping, subdued inflation is hardly grounds for crowing; it's further proof that the Fed's policies are not working. Cheap money is not expanding production and raising wages as planned, it's not increasing demand — and thus not raising prices for goods and services. Inflation is the dog that's not barking.

    http://thehill.com/blogs/pundits-blog/finance/241836-reckoning-for-the-fed
     
  2. Revmitchell

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    ".....Yet, even as business investment languishes and manufacturing has hit the skids, and with America's annual growth rate coming to a near halt at 0.2 percent for this year's first quarter, our monetary authorities seem clueless about the impact of their own policies. Indeed, the Fed's instinctive position is to call for more government intervention in the economy. Don't expect any initiatives to scale back regulatory burdens or liberate market forces to spur real economic growth.

    Instead, you can expect increasing calls from Fed officials to give themselves more room to maneuver by raising their target rate of inflation to 4 percent or higher — never mind that such monetary mischief utterly confounds business planning and leads to the misallocation of investment resources. And you can expect further demands for massive government spending on "public infrastructure development" to create jobs. It's what Bernanke recommends in his blog post, insinuating that some other part of government needs to join the Fed's stimulus party to attain economic growth.

    But shouldn't we start by figuring out the reasons for the Fed's own lack of success?"
     
  3. poncho

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    No we should abolish it. We already know the reason for the Fed's lack of success. Ponzi scheme's can only go on for so long.
     
    #3 poncho, May 13, 2015
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  4. InTheLight

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    If you queried American citizens as to whether they would support a monetary experiment conducted by the Reagan administration to stimulate economic growth — an unorthodox approach that would mostly benefit large corporations and wealthy investors at first, but would ultimately trickle down to help everyone else — would they approve?

    And if you explained that it might take some time to deliver the desired outcome of higher employment at higher wages, and that people in the vast majority of households would have to accept much lower rates of return on their savings as inflation is wrestled lower and interest rates decline, wouldn't a few perceptive respondents tilt their heads and ask: How long?

    So why did such a reasonable question raise such ire from adherents of Reagonomics in the 1980's?
     
    #4 InTheLight, May 13, 2015
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  5. InTheLight

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    Who writes these lies? Is this a continuation of the previous article?

    Business investment outlook brightens
    Businesses may finally be ready to spend the $1.6 trillion in cash they've been hoarding. And that's good for the economy. A survey out today shows 61% of corporate economists say their firms will likely increase capital spending in the next year. That's up from an average 52% in the past four quarterly surveys by the National Association of Business Economics (NABE). Companies with big spending plans include Whirlpool. It's investing $40 million to double the size of its KitchenAid mixer factory in Greenville, Ohio, and add 400 jobs there by 2018.

    http://www.usatoday.com/story/money...iness-investment-outlook-brightening/7875061/

    U.S. Factories Head Into 2015 With Optimistic Eye
    U.S. factories, coming off their best performance since 2010, enter the new year optimistic that a December slowdown in growth will be a temporary blip. The Institute for Supply Management on Friday said its purchasing managers’ index fell to 55.5 in December. That is down from 58.7 in November and below the 57.4 forecast by economists. For the year, the PMI averaged 55.8, the best reading since the first full year after the 2007-09 recession.

    http://www.wsj.com/articles/ism-manufacturing-index-falls-in-december-1420212357

    Ha ha, talk about naked manipulation of data! Read that sentence again--The ANNUAL growth rate for the FIRST QUARTER was 0.2 per cent. The author is using the first quarter growth rate, and only the first quarter growth rate, ignoring all previous quarters and projecting it as if it will be the annualized rate. Like the rest of the article, that's dishonest.

    U.S. 2.4% Economic Growth In 2014 Strongest Since Recession

    http://www.forbes.com/sites/samanth...onomy-grew-2-6-in-fourth-quarter-2-4-in-2014/


    Why does the Federal Reserve aim for 2 percent inflation over time?

    The Federal Open Market Committee (FOMC) judges that inflation at the rate of 2 percent (as measured by the annual change in the price index for personal consumption expenditures, or PCE) is most consistent over the longer run with the Federal Reserve's mandate for price stability and maximum employment. Over time, a higher inflation rate would reduce the public's ability to make accurate longer-term economic and financial decisions.

    http://www.federalreserve.gov/faqs/economy_14400.htm


    But doesn't begging the question undermine the author's credibility? Oh well, I guess all the other lies that were told already shot it to heck, so why not beg the question?
     
    #5 InTheLight, May 13, 2015
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  6. poncho

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    Gold and Economic Freedom

    by Alan Greenspan

    An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

    In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

    < Snip >

    In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

    This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.


    Continue . . . http://www.constitution.org/mon/greenspan_gold.htm
     

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