Best of the Week
Most Popular
1.SNP Offers Labour Deadly Death Embrace Alliance, Holding England to Ransom, Destroy UK From Within - Nadeem_Walayat
2.Gold And Silver – Most Widely Used Currency In Western World? Stupidity - Michael_Noonan
3.Election Forecast 2015 - Coalition Economic Recovery vs Labour Collapse - Nadeem_Walayat
4.Election Forecast 2015 - Debates Boost Labour Into Opinion Polls Seats Lead - Nadeem_Walayat
5.Why are Interest Rates So Low? Ben Bernanke, Confused as Ever, Starts His Own Blog to Prove It - Mike_Shedlock
6.Leaders Debate Election 2015 - Natalie Bennett Green Party Convincing Anti-Austerity More Debt Argument - Nadeem_Walayat
7.Labour Economic Collapse vs Coalition Recovery - UK Election Forecast 2015 - Video - Nadeem_Walayat
8.China’s Stock Market Mania; How High can Red-chips Fly? - Gary_Dorsch
9.Gold and Misery, Strange Bedfellows - 31st Mar 15 - Dan_Norcini
10.Ed Miliband Debate Election 2015 Analysis - Labour Spending, Debt and Economic Collapse - Nadeem_Walayat
Last 5 days
Q1 Corporate Earnings Risky for Stocks - 17th Apr 15
US Stock Market Getting Scarier by the Day - 17th Apr 15
Stock Market Watershed Day - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
Gold Price Has “Hallmarks Of Market That Is Bottoming” - 17th Apr 15
Chinese Stock Market - Men Go Mad in Herds - 17th Apr 15
Two Stocks Offering Investors High Yields and Profits - 17th Apr 15
King Dollar Hurting Stock Market Corporate Earnings! - 17th Apr 15
Production Declines Hide Bigger Crude Oil Storage Issues - 17th Apr 15
Top Three Takeaways From Today’s OPEC Crude Oil Report… and How You Can Profit - 17th Apr 15
How to Profit from Australia's Healthiest Biotech Stocks - 17th Apr 15
What Is Really Driving Gold Price? - 17th Apr 15
Will Ever More Boomers Selling Retirement Assets Change Investment Prices For Decades? - 16th Apr 15
Won't Be Contagion with 'Grexit' Greece Euro-zone Exit - 16th Apr 15
Sharp Decline in USD/CAD and Its Consequences - 16th Apr 15
Blackstone is like Apple, Google, Hermes, Boeing - 16th Apr 15
The Most Dangerous Financial Headline I've Seen Since the 2008 Crisis - 16th Apr 15
Is Legal Tax Avoidance Extinct in the UK? - 16th Apr 15
Why Russia Will Send More Troops to Central Asia - 16th Apr 15
More Thoughts on the Current Crude Oil Market - 16th Apr 15
U.S. Treasury Secretary Warns Greek Exit Will Cause Enormous Disruption and Hardship - 16th Apr 15
The Hottest New Place to Find Stock Dividend Income in Q2/2015 - 15th Apr 15
How to Escape the Pensions Squeeze - 15th Apr 15
Water Crisis Game Changing Water Revolution - 15th Apr 15
The Drying of California - Corporate Farms Control of Water - 15th Apr 15
OPEC Going Broke, Dumping U.S. Dollars. Is That Good Or Bad? - 15th Apr 15
OPEC Just Confirmed It’s Losing the Oil War - 15th Apr 15
Four Uranium Companies Poised to Profit from the Growth of Nuclear Power - 15th Apr 15
Stock Investing Tread Softly… and Carry a Big Risk-Management Calculator - 15th Apr 15
Crude Oil Price Technical Outlook - 15th Apr 15
Important Bitcoin Price Action - 15th Apr 15
UK House Prices, Immigration, Population Growth and Election Forecast 2015 - 15th Apr 15
Peter Schiff on U.S. Dollars, Drachmas and Debt - Video - 14th Apr 15
The Ultimate Middle East Dilemma: Time For Us To Stop Intervening? - 14th Apr 15
Greece Debt Default and Drachma By End of April? - 14th Apr 15
Coming to Terms With the American Empire - 14th Apr 15
The Ball is in the Stock Market Bulls Court - 14th Apr 15
Tech Stocks Bubble: Different this time? - 14th Apr 15
Stock Market Sixth Sense - 14th Apr 15
Separating Gold and Silver Stocks Saints from the Sinners - 14th Apr 15
Conservatives Bribe Labour Voters by Extending Right to Buy to Housing Association Tenants - 14th Apr 15
Stacking Silver = Simple Solution - 13th Apr 15
Why Markets Ignored Weaker Payrolls - 13th Apr 15
Tory Attack on Ed Milliband Backfires as Labour Takes Opinion Polls Lead - 13th Apr 15
A "Digitalized" Stock Profit Play Mr. Spock Would Love - 13th Apr 15
New Credit Crunch Underway: Can Recession Be Far Behind? - 13th Apr 15
Western Interest in Gold Continues to Decline - 13th Apr 15
Stock Markets Breaking Out Worldwide - Buy the Dips Ride the Trend - 13th Apr 15
Silver Price set up to get Whacked Again - 13th Apr 15
Gold Price Dome Cap, Fall Below $1000 Likely - 13th Apr 15
Stock Market Accumulation or Distribution - 13th Apr 15
BLS Economic Propaganda, Truth – The Cure for Cognitive Dissonance - 12th Apr 15
A Case for Monetary Independence - 12th Apr 15
Drought and the Failure of Big Government in California - 12th Apr 15
Stocks Bull Market Continues - 11th Apr 15
Why the American Consumer Will Never Be Back - 11th Apr 15
End Of Islam, Hinduism And Christianity And Rise Of The Age Of Humanism, Spirituality And The Universal God - Sanadhana Dharma - 11th Apr 15
Gold And Silver Nothing Of Substance Going On. Fiat “Dollar” Controlling? - 11th Apr 15
The Most Dangerous Financial Headline I’ve Seen Since 2008 - 11th Apr 15
Alibaba Pggybank Investment Will Make You a Millionaire - 11th Apr 15
Ghosts In The Machine - Population Growth vs Food Production - 11th Apr 15
Gold-Futures Short Covering Rally - 11th Apr 15
Is Bitcoin Price Going down Some More? - 11th Apr 15
Stock Market Pivotal Events - History is Fact - 10th Apr 15
Gold Price “Going Higher” and “A Big Buy Here” - 10th Apr 15
Oil Price - How Much Longer Can OPEC Hold Out? - 10th Apr 15
Euro-zone Crisis - Germany’s Trade Surplus Is a Problem - 10th Apr 15
U.S. Investors Face a Giant, Historic Stock Market Bubble - 10th Apr 15
Greece, Gold, The Death Of Paper Money And The Modern State - 10th Apr 15
Gold and Silver Expect Lower Prices Once Again - 10th Apr 15
How Easy Money Drives the Stock Market - 9th Apr 15
Who Owns the North Pole? - 9th Apr 15
The Tax Collector’s Puzzle - WAIT: Don't File Those Taxes Just Yet! - 9th Apr 15
Austrian Government to No Longer Guarantees Bank Deposits - 9th Apr 15
Buy Gold and Silver Stocks Before the Bear Goes into Hibernation - 9th Apr 15
EURUSD: Why Recent Ups and Downs Are NOT Random - 9th Apr 15
Five Total Wealth Stock Market Investing Principles to Use Today - 9th Apr 15
U.S. Hegemony and Dollar Threatened By New Chinese Bank - 9th Apr 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Historic Bubble

No Economic Recovery, Stimulus Spending and Intended Consequences?

Economics / Economic Stimulus Oct 08, 2010 - 12:28 PM GMT

By: Andy_Sutton

Economics

Best Financial Markets Analysis ArticleAs was generally expected, this morning’s employment situation report gave another bundle of evidence to suggest that there is in fact no recovery, never was, and that several trillion dollars of ‘stimulus’ has disappeared down a rat hole of greed. In typical fashion, the mainstream press tried yet again to put a positive spin on a negative reality, pointing to the fact that we should rest easy; the Fed is going to buy government bonds to save the day. It is in total wonderment that I listen to these happy expectations and can only guess if these people know what they’re even wishing for. Let’s look at a few examples.


AP Business Writer Stephen Bernard writes:

“High unemployment remains a major hurdle as economic growth continues to be sluggish. The Labor Department's report, considered the most important on the economic calendar, did little to alter anyone's perception about the strength of the economy.

While the job growth remains scarce, there could be a silver lining. Expectations are growing that the Federal Reserve will try to stimulate the economy through the purchase of government bonds. The gloomy jobs report could give the Fed more incentive to act.”

While this is certainly true, do we really want the private, non-government Federal Reserve buying more bonds? It is bad enough that the Chinese already own massive portions of our future economic output in the form of Treasury Bond holdings. They own scads of mortgage bonds as well. Does anyone out there feel comfortable about the Chinese holding the note on your house? How about the Fed? Do we really want them owning the notes on any more of our homes? I asserted years ago that the housing bubble was nothing more than a property-grab and all indications are that it has been little more than just that.

Let’s look at another news outlet and their thoughts. Greg Robb at Marketwatch writes:

“There is little in the data to suggest further easing measures aren’t up the Federal Reserve’s sleeve. Prior to the report, economists had said that a strong U.S. payrolls number would be needed to take pressure off the Fed to deliver a second round of quantitative easing.”

Essentially the same pabulum from another ‘independent’ media outlet. The fancy term quantitative easing (QE) must be explained to the masses. We’ll try to sum it up in a few sentences so everyone is clear. QE entails the printing of money. It is what happens when interest rates are already at zero. The Fed cannot reasonably pay people to borrow money (negative interest rates) and expect this charade to continue. So QE is the printing of money, which is then used to buy certain strategic assets such as stocks, bonds, etc in the hopes of goosing markets and giving the Treasury ill-gotten cash with which to continue ‘stimulating’ the economy. QE is, in essence, declaring a fire sale on America, then creating the money from nothing to take advantage of the sale.

To make an analogy, it is kind of like you and I lending a bunch of money to a store, getting the store hooked on easy credit, etc. etc. then when it breaks, walking into the store with a pile of Monopoly money and buying the entire inventory. This is robbery and needs to be called for what it is.

And now, perhaps my favorite, coming from Reuters:

“Expectations the Fed, which has already pumped $1.7 trillion into the economy by buying mortgage-related and government bonds, would announce a second phase of quantitative easing at its Nov. 2-3 meeting have buoyed U.S. stocks and prices for shorter-dated government debt and have undercut the dollar.”

There is QE again. Sounds mighty fancy to the untrained ear, doesn’t it? Notice that even Reuters gives the truth almost as an afterthought. QE, and/or the expectation thereof, has undercut the dollar. That affects Main Street. Wages are stagnant, jobs are very hard to come by, and the Fed is purposely undertaking a course of action that will further squeeze Main Street by driving up the cost of living. While the Fed might get a 9.5 for style points and the fancy terminology, it gets a big, red, F- in terms of stewardship of its two legal mandates: maximum employment and price stability. Round 1 of QE didn’t help and there is no reason to believe that more of the same will do any better.

And how about the recent rally in stocks? Are any of these gains real? Of course not. The dollar is tanking while stocks, Gold, and oil take off. The Fed is trying to rekindle inflationary expectations to artificially pump markets. If they are successful, it will most assuredly be at the expense of the American taxpayer-consumer.

This is the crossroads at which we now stand. The M3 contraction that has been occurring for the entirety of 2010 will either be allowed to continue, which would have a cleansing affect despite the many negative manifestations in the real economy, or the Fed will simply try to overwhelm market forces and fill a $200+ trillion fiscal gap with dumpsters of worthless paper dollars.

So far the Fed et al have proven to be completely unable to perfect the ‘kick the can down the road’ approach. The economy is sliding despite QE and other miscellaneous efforts to this point. Certainly things might be ‘worse’ had they done nothing, but we can certainly make the argument that in this case, the cure is worse than the disease.

By Andy Sutton
http://www.my2centsonline.com

Andy Sutton holds a MBA with Honors in Economics from Moravian College and is a member of Omicron Delta Epsilon International Honor Society in Economics. His firm, Sutton & Associates, LLC currently provides financial planning services to a growing book of clients using a conservative approach aimed at accumulating high quality, income producing assets while providing protection against a falling dollar. For more information visit www.suttonfinance.net

Andy Sutton Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Joshua Gamen
02 Nov 10, 14:11
Well said - I appreciate your writing!

People need to hear what you are saying - it's true and great stuff!

http://www.youtube.com/watch?v=7t4rzPBcKRo


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014