• Gold Standard I...
    01/12/2016 - 00:57
    Jamie Dimon, JP Morgan ChaseBrian T. Moynihan, Bank of AmericaMichael Corbat, Citigroup I am writing to you to warn you about the disruption that is about to occur in banking.

Why isn't the US growing at 6.25%





 
The US recovery is supposedly now well underway. So here is a puzzle that I can't figure out. The Fed has been buying up bonds at a rate of $85 billion a month. I know that Bernanke has hinted that this may come to an end, but not immediately. Now $85 billion a month times 12 months is over $1 trillion. The US GDP is about $16 trillion. Now, if the Fed had decided to stimulate the economy by using the Treasury Department's freshly printed cash to buy new cars or pencils or houses or televisions or farmland or anything really other than bonds, I figure that this would have made a contribution to US GDP of $1 trillion. On a GDP of $16 trillion, this would have increased GDP by 6.25%. Not bad growth. Now I know that the Fed can't hold cars or pencils or houses or television or farmland on its balance sheet. So it holds bonds. My point is.... all that money printing could have otherwise generated 6.25% growth -- and all the US has is a paltry 1.8%. Am I misunderstanding something, or is this US recovery that bad. I mean, even though the Fed bought bonds, in an ideal world those who sold those bonds would now have an extra $1 trillion to spend on cars and pencils and ... (you get the idea). So all this stimulus and I figure we are still more than 4% behind where we should be in growth. Can you explain? Signed, Dumbfounded
 

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