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●The more federal budgets are cut and taxes increased, the weaker an economy becomes.
●Austerity is the government’s method for widening the gap between rich and poor, which ultimately leads to civil disorder.
●Until the 99% understand the need for federal deficits, the upper 1% will rule.
●To survive long term, a monetarily non-sovereign government must have a positive balance of payments.
●Those, who do not understand the differences between Monetary Sovereignty and monetary non-sovereignty, do not understand economics.
●The penalty for ignorance is slavery.
●Everything in economics devolves to motive.
As usual, the Fed is expected to do its job and Congress’s job.
Markets Need Janet Yellen to Kick Them in the Pants
Rana Foroohar March 19, 2014
She gets hammered by pundits and bankers alike for supposedly ending Bernanke style clarity . . .
“Clarity.” The only one deeper into deliberate obfuscation was Greenspan (so maybe today, less double-talk is considered “clarity, by some.)
For starters, Bernanke’s “clarity” over the last few years was largely Yellen’s doing, in the sense that she’s the one that came up with the 2 % inflation target rate . . ..
Then, there’s the supposedly “hawkish” rate increase (the median interest rate forecast increased 0.25 % to 1 %)
Again, let’s all practice mindfulness, and focus on what we know will happen if rates stay low forever. Bubbles will form—and they will pop.
This gets to the myth that low rates stimulate the economy, when in fact, there is zero relationship between low interest rates and GDP growth.
And as for bubbles, she probably is referring to the real estate “bubble,” which was not caused by low rates, but rather by bad lending practices. (No matter what the rate, if you give everyone off the street a 100% loan against phony collateral, you’re going to have a bubble.)
The Fed’s $4 trillion money dump has already created what Yellen and other Fed leaders know are price distortions in everything from emerging market equities to commodities to certain real estate markets.
The so-called “money dump” was Quantitative Easing (QE), which didn’t dump any money and didn’t stimulate the markets.
The sole purpose of QE was to keep long-term interest rates low. Period. (The Fed has direct control over short term rates via the Fed Funds rate.)
But that isn’t stimulative, although it did distort prices. (When was the last time you bought a bank CD?)
Many people might wish that the Fed’s easy money and low-interest rate policy could do more for the economy, it probably can’t.
Not “probably” can’t. Absolutely can’t.
There are complicated structural reasons why we are in the longest and weakest recovery of the post WW II period.
Structural, yes. Complicated, not so much. The simple reason is the deficit is too low and is declining. (See: The Recession Clock ticks; the recession draws closer
That shows just how dependent investors have become on Fed news going in one direction only and how removed some asset prices have become from fundamentals.
Asset prices are not removed from fundamentals. They are removed from what the Fed, the market, Congress and Ms. Foroohar claim are the fundamentals.
Yes, there are several fundamentals, but by far the most important one is federal deficit spending, i.e. money creation, and that is Congress’s job, not the Fed’s job.
If I were President, this is what I would tell the Fed Chairman: “You have one job: Keep inflation near a 1.5% – 2% target.
“Forget about then stock markets. Forget about housing, and the crooked bankers and GDP. Those are all the responsibility of Congress and me.
“Focus all your attention on inflation.
“If you see inflation begin to creep up, raise interest rates. If we are in danger of deflation, lower interest rates. That is your job.”
But what is the likelihood of that, when Congress and the President have a handy whipping boy to blame for economic problems (while taking all credit for any recovery).
My question is: If Congress and the President are not responsible for the economy, what the hell is their job?
Rodger Malcolm Mitchell
Nine Steps to Prosperity:
1. Eliminate FICA (Click here)
2. Federally funded Medicare — parts A, B & D plus long term nursing care — for everyone (Click here)
3. Provide an Economic Bonus to every man, woman and child in America, and/or every state a per capita Economic Bonus. (Click here) Or institute a reverse income tax.
4. Free education (including post-grad) for everyone. Click here
5. Salary for attending school (Click here)
6. Eliminate corporate taxes (Click here)
7. Increase the standard income tax deduction annually
8. Increase federal spending on the myriad initiatives that benefit America’s 99% (Click here)
9. Federal ownership of all banks (Click here)
10 Steps to Economic Misery: (Click here:)
1. Maintain or increase the FICA tax..
2. Spread the myth Social Security, Medicare and the U.S. government are insolvent.
3. Cut federal employment in the military, post office, other federal agencies.
4. Broaden the income tax base so more lower income people will pay.
5. Cut financial assistance to the states.
6. Spread the myth federal taxes pay for federal spending.
7. Allow banks to trade for their own accounts; save them when their investments go sour.
8. Never prosecute any banker for criminal activity.
9. Nominate arch conservatives to the Supreme Court.
10. Reduce the federal deficit and debt
No nation can tax itself into prosperity, nor grow without money growth. Monetary Sovereignty: Cutting federal deficits to grow the economy is like applying leeches to cure anemia.
Two key equations in economics:
1. Federal Deficits – Net Imports = Net Private Savings
2. Gross Domestic Product = Federal Spending + Private Investment and Consumption – Net Imports
THE RECESSION CLOCK
As the federal deficit growth lines drop, we approach recession, which will be cured only when the lines rise. Federal deficit growth is absolutely, positively necessary for economic growth. Period.