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The Truth About the Fed’s Relationship With Bubbles
Many commentators have previously argued that the Fed is too dumb or too inept to identify of categorize asset bubbles.
By focusing on the Fed’s mental acuity, these commentators are overlooking a key factor: the Fed WANTS to asset bubbles.
The reason for this?
Asset bubbles, at least according to the Fed’s models, will paper over the steady decline in quality of life that began in the US roughly 50 years ago.
This fact is staring everyone in the face, though few people make it explicit. Back in the 1950s, the average American family had one working parent and was able to get by just fine. Today, most families have two working parents, sometimes working more than two jobs and they’re still not able to live a stable life.
Indeed, a 2012 study by NYU Professor Edward Wolff found that the median net worth of American households was at a 43-YEAR LOW. The average American in the 21st century was in worse shape than his 1970s counterpart.
This process began to accelerate in the late ‘90s. Indeed, looking at real media household income, one can see clearly that things have generally been downhill for nearly 20 years now.
It is not coincidence that the Fed began blowing serial bubbles starting in the late ‘90s. The Fed is aware on some level that quality of life in the US has fallen. The Fed’s answer, rather than focus on items that it doesn’t understand (job growth, income growth, etc.) was to blow bubbles to paper over this decline.
This is why we’ve had bubble after bubble after bubble in the last 15 years. The Fed doesn’t have a clue how to create jobs or boost incomes. Why would it? Most of the Fed’s Presidents are academics with no real world business experience.
Instead, the Fed believes in the “wealth effect” or the theory that when housing prices or stock prices soar, people feel wealthier and so go out and spend more money. This theory is baloney. People spend based on their incomes, NOT the value of their homes or portfolios.
After all, both assets only convert into actual cash once the owner sells the asset. Anyone who goes out and spends more money because their home went up in value will only end up with credit card debt, which combined with their mortgage, puts an even greater strain on their financial resources.
The Fed wants asset bubbles because they hide the rot within the US economy. If the Fed didn’t raise stock or housing prices, people might actually start to wonder… “hey, why is my life getting more and more difficult despite the fact that I’m working all the time?”
The Fed wants bubbles. So we’re doomed to keep experiencing them and the subsequent crashes.
This concludes this article. If you’re looking for the means of protecting your portfolio from the coming collapse, you can pick up a FREE investment report titled Protect Your Portfolio at http://phoenixcapitalmarketing.com/special-reports.html.
This report outlines a number of strategies you can implement to prepare yourself and your loved ones from the coming market carnage.
Best Regards
Phoenix Capital Research
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I agree with the premis of this article, that the real standard of living of the American people, as measured fairly has gone down over the last several decades. I would argue, (And I do in the attached article), that the primary reason for the disruption in the market's ability to turn, needs into wants, innovation creating new wants, that are the hallmark of the capitalist system, has been crushed by the weight of regulation. That is why the Fed must create bubbles to hide the decline in real outcomes.
I wrote this the day of the last open market meeting...
http://incapp.org/blog/?p=2299
"weight of regulation" -- LMFAO!!!!
How about the utter lack of any real rule of law asshole? If you drive your business into the fucking ground you deserve to go bankrupt.
A bubble is also called the redistribution of wealth. The transfer of income, wealth or property from some individuals to others caused by an act of God.
The more and more I study derivatives it now appears the main goal of QE may have been to hold up the underlying value of assets that feed into and support the massive derivative market more than help the economy. QE has up to now stopped an implosion of derivatives and the resulting contagion and shock that would have spread throughout the financial system. In postponing this collapse the Fed has created a whole slew of new problems. More on this subject in the article below.
http://brucewilds.blogspot.com/2014/03/derivatives-house-of-cards.html
I farted in the tub last night.
Reminded me of the Fed and bubbles.
Huge eruption, gawd awful stench, then, nothing.
It was all gone, like it never existed.
Welcome to Soviet Amerika, the Collective.
Bubbleology 101 : "The longer it festers, the worse its stench."
If you lit a derivative match it would have gone poof with a nice fireball!
Bubbles may not help the average citizen or the economy, but what about the connected speculator who trades on inside info? What about Richie Rich and his carry trade buddies? What about them?
I think there are some 'muricans get lots a help from these bubbles... the trick is figurin' out who they are and how the Fed does it!
None of this is about ideology or economics. It's about scheming psychopaths.
Here's the truth, look at all of it.
http://patrick.net/forum/?p=1230886
I would argue that the creator is being far too generous as to where the Dow should be. I agree that on real terms us based companies that made up the Dow probably should have grown faster than inflation. For the last 20 or 30 years, though, I would argue that real growth should be below inflation. We haven't been producing shit. Well, I take that back. We have produced a shitload of debt.
If the Fed hadn't been pumping $$$$ into the economy we'd be in a deflationary depression-that's NOT saying the printing was good.
When the $$$$ bubble finally bursts, it's gonna be rough.
WRONG. We as a capitalist country would have FAILURES of those with too much debt and it would be forced to RESTRUCTURE. BK is a good thing!
Looking forward to it. Gonna be able to buy all kinds of shit at prices not seen in decades. And if things get nasty so be it. Taking some anger out on some shitheads would probably be good for my health.