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Page added on October 4, 2013
Have We Reached Peak Federal Reserve?
As the Fed-induced asset bubbles in stocks, bonds and real estate follow the inevitable Supernova track to implosion, that we’ve reached Peak Federal Reserve will be obvious–in hindsight.
Billionaires and political lackeys alike have been falling all over themselves in the rush to praise the Federal Reserve’s unprecedented monetary intervention since 2008. That billionaires and political hacks, apparatchiks and toadies cannot laud the Fed’s Cargo Cult enough is no surprise: the billionaires and the government that feeds them both gained handsomely from the Fed’s policies:
Government spending: up strongly since the Fed began pumping nearly-free credit and ample liquidity.
Corporate profits: soaring to new heights in the Fed-Bubble Era.
S&P 500: new nominal highs for stocks in the Fed-Bubble Era.
But what about the consequences for the non-billionaire, non-government, non-financial real economy?
Monetary base: this is what happens when the Fed creates money out of thin air to buy Treasury bonds and mortgages. Does this look remotely sustainable in the long-term?
Money velocity: in a strong economy, money velocity is high (for example, the mid-1990s) and weak in recessions (for example, 1973, 1982 and 2002). Money velocity has fallen to unprecedented levels, lower than any recession of the past 40 years.
Here’s what all that Fed magic (jacking up money supply and lowering interest rates to near-zero) accomplished in terms of wages:
Here is household income, adjusted for inflation since 2000: it’s hard to overstate how successful the Fed’s policies have been in the real economy; no wonder billionaires and political toadies can’t praise the Fed enough. Real household income only fell 7.2% under the Fed’s billionaire-politico-friendly policies.
Employment per capita: this is employment adjusted for population growth: back to the levels of the late 1970s.
Full-time employment: all the way up to the same level of 13 years ago, while the U.S. population grew by 28%.
These charts provide ample evidence that we’ve reached Peak Federal Reserve: its monetary policies (zero interest rate policy–ZIRP, quantitative easing–QE, purchasing $1+ trillion home mortgages to jack up the housing market, etc.) have boosted the fortunes of billionaires and free-spending, easily-bought politicos but left wages and employment to stagnate.
All the Fed’s goodies for the billionaires–the assets bubbles in stocks, bonds and real estate–have reached the point of “as good as it gets.” From here on in, these bubbles have nowhere to go but down. As the Fed-induced asset bubbles follow the inevitable Supernova track to implosion, that we’ve reached Peak Federal Reserve will be obvious–in hindsight.
Charles Hugh-Smith of OfTwoMinds blog
6 Comments on "Have We Reached Peak Federal Reserve?"
BillT on Sat, 5th Oct 2013 12:34 am
We reached peak federal reserve 100 years ago and should never have allowed them back into the US. They have been a nest of liars since they were started in 1913. They took the dollar value from 100 cents to 4 cents in 100 years, now they are taking everything real that they can get their hands on including homes and saving of the American people.
Even their name is misleading by plan. They are NOT part of the Federal Government. They are a ‘for profit’ bankster cabal that sucks wealth out of the middle and lower classes and sends it to the billionaires. They are just part of the worldwide banking cartel owned by the Rothschild family.
Their goal is to own/control it all and run the world. What else would trillionaires do with their time if not play with nations and want power?
dave thompson on Sat, 5th Oct 2013 7:56 am
We are owned, the saving grace is just that as long as the system sputters along and we the people keep feeding the beast, the beast is stated. Once the wheels fall off the food cart however all bets are off. The powers that be will have one choice but to draw the planet into believing in a phantom enemy that will fool us into war.
Arthur on Sat, 5th Oct 2013 8:32 am
Like JFK and Ron Paul proposed, the FED needs to be abolished and replaced by a public, yet independent central bank, with only one vocation in life: keeping inflation at 2% max. No need for a gold standard, except maybe in international trade.
J-Gav on Sat, 5th Oct 2013 9:04 am
Wouldn’t it be nice if it happened soon?
Remember that old song: “I’m forever blowing bubbles, pretty bubbles in the air …” That’s all they know how to do so it’s bound to come down with a bang one of these days.
J-Gav on Sat, 5th Oct 2013 9:11 am
BillT – While it’s true that the Rothschild, Morgan, Rockefeller, Warburg dynasties are still around in their present-day avatars, over the course of the 20th century they had to share the upper echelons with a number of other “families” and yes, you can read that in the mafia sense of the term.
BillT on Sat, 5th Oct 2013 10:21 am
True, J-gave, but they stay out of the press because they control more wealth than the visible top 500. The truly wealthy are unseen and unheard but hold more power then kings.
And, Arthur, there is no need for ANY inflation. Even two percent per year will quadruple costs within a human life time. Profit is the invention of the elite. There is no need for profit in a fair world where EVERYONE works to provide for himself. It is when you have those who do not produce and live off of others production that is wrong.