BusinessWeek Writes: Thanking the Fed, Reservedly, for Investors’ Bounty
Don’t look at me like that—Walgreen (WAG) went full-yuletide in August. In any case, should you find yourself looking at your 401(k) for the first time since the Subprime Swoon, be Thanksgivingukkah-grateful for the extraordinary largesse of this Federal Reserve.
Thanks to outgoing Fed Chairmen Ben Bernanke and the nominee to replace him, Janet Yellen, and their colleagues taking down interest rates to near-zero five years ago and keeping them there—on top of the Fed’s nearly $4 trillion of creative asset purchases—investors have enjoyed the restoration of more than $13 trillion in U.S. equity market value. That’s called multiplier effect. And it’s also called remorse, if you were one of the record numbers who bolted stocks altogether and are scrambling to get back in now, after indexes have more than doubled. It’s also called financial repression if you’re a saver having to eat negative real rates on your hard-earned cash.
I have no words. You have got to be f#&*$ kidding me. I don’t know how many times I have to say this, but thanking Bernanke or the FED would be equivalent to thanking your drug dealer for getting you hooked on crack cocaine, or thanking a hooker for giving you AIDS or thanking God for helping you get home again while driving drunk.
All of these things might feel good at the moment, but they will eventually catch up and kill you. What most people do not understand is that by pumping a tremendous amount of money into the economy over the last 2 decades, the FED has created bubble after bubble in various asset classes. All while undermining the overall economy.
The stimulus works great until it doesn’t work anymore. We are at that point. With massive amounts of credit flooding the system, the velocity of that money is having less and less impact. When the tide turns, there will be hell to pay not only for the people who are directly involved in the scheme, but for everyone. Not only for the US Economy, but now for the global economy. Everyone.
The sad part is, all of this was preventable is we had the fortitude to stick to sound economic principals. Instead we have a bunch of whack jobs on every level of our government whose sole purpose is to max out our credit cards and kick the can down the road. The upcoming bear market of 2014-2017 will make all of this very clear.
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