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The Fed's Complete Misunderstanding of Economics and the Impact of QE
The Fed and other Central Banks have shifted away from focusing on growth to focusing on inflation.
The explanation here is as follows: they’ve failed to create growth, debt deflation is their worst nightmare, so the best they can hope for is inflation to make debt servicing easier.
However, by leaving interest rates at zero, the Fed has unleashed its worst fear: deflation… particularly deflation in consumer spending and consumer psychology… the lifeblood of the US economy.
It sounds totally counter-intuitive, but let’s consider the following.
If you are retired or close to retired, your primary concern is having enough money to enjoy retirement and possibly leave a little something for your children/grandkids.
Since you will no longer be working (hopefully), your money will come from interest income on the pool of capital you have accumulated by now.
If you’d saved $1 million, and interest rates are 4%, you’ve got interest income of $40,000 per year. That’s not bad at all if you’ve paid off your house and accomplished the other items associated with “the American Dream.”
However, if you’ve saved $1 million and interest rates are 0.25% as they are today, your interest income is $2,500 per year.
This is HIGHLY deflationary because you are making next to nothing, which means that in order to survive you have to spend your savings.
This reduces your total capital, as well as the potential for greater future interest income (the amount of capital you have to produce interest income down the road is shrinking).
If this scenario, you’re not going to go out and start living high on the hog. You are going to start being more frugal and careful with your expenses because money is not coming in at the pace you’d hoped.
Consequently, your spending goes down and you enter a kind of “capital hibernation.” You’re not going to start plunging your money into risky investments because you are more averse to loss of capital than potential gains.
Again, your primary focus is on monthly payouts on interest income, NOT capital gains. How many 60+ year old day traders are there really? How many individuals dream of working their whole lives just so they can retire and start gambling in the stock market?
The answer is next to none. The Fed, by cutting rates lower and engaging in QE, has crippled the potential returns for the Baby Boomer generation. This has killed off consumer spending (baby boomers are the single largest pool of capital in the US) and hampered anything resembling an economic recovery.
And all it’s done is result in active investors taking on more and more leverage to increase returns. Today the financial system is even more leveraged than it was in 2007.
And we all know what came after that.
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Best Regards
Phoenix Capital Research
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The FED has harvested the Peoples time and energy since 1913. It's a toxic world with the money, gold, and millions of homesand families gone or destroyed. Welcome to the American nightmare!
"The Fed's Complete Misunderstanding of Economics and the Impact of QE"
Many other thieves will tell a similar sob story.
The banksters need to repay us.
Guillotine the Fed. Audit the heads.
"...this is HIGHLY deflationary because you are making next to nothing, which means that in order to survive you have to spend your savings."
And therein lies the ultimate retaliation against what's been done. I choose to live even more frugally than I've ever lived, at the same time enjoying life via very small pleasures, and I choose not to support those who own governments and abuse power by making decisaons not to buy their goods not believe their b.s. Enjoy your ill-gotten gains all ye who laugh and scheme. Your commupance approaches.
Netwerk @0ranjePapegaaY verwacht dat (pensioenfondsen, verzekeraars en andere institutionele beleggers) netwerk Juncker op de hoogte is dat de @MinPres van Griekenland bezig is om toestemming van de G7 te vragen om het uitrollen van de 'Logica van de 1' te versnellen.
http://www.trouw.nl/tr/nl/4496/Buitenland/article/detail/3945840/2015/04...
Natuurlijk mag de 'gecontroleerde paradigma-wisseling naar het systeem 'Leven en Laten Leven' niet vol in de publiciteit komen en mocht 'Duitsland de eis voor herstelbetalingen resoluut afwijzen' om zo de 'aandacht van de echte problemen' af te leiden.
http://www.volkskrant.nl/sport/waarop-wachten-de-organisatoren-totdat-er...
De val van het IMF (lees: het SCHULD=H00P-paradigma) werd natuurlijk in netwerk WitteGejT al zichtbaar met de haatcampagne tegen de toenmalige IMF-topman Dominique Strauss-Kahn. Maar zolang er geen (zichtbare) doden vallen ten gevolge van het uitrollen van de 'Logica van de 1' gaat netwerk @GuusjA vol stoom verder met ...
http://www.tweedekamer.nl/vergaderingen/commissievergaderingen/details?i...
=== Deze vergadering moet nog plaatsvinden ===
Technische briefing Besloten technische briefing Rekenkamerrapport "De Staat als aandeelhouder" (Let op! gewijzigd begintijdstip; was 16.30 uur)
QE did just what the FED wanted - transferred debt to the poverty class and equity to the oligarchy. What will they do next?
All you guys are here. I found you. Sad saps from Prudent Bear Chat and other bear sites. You are not smart, informed, or ahaed of the dreaded "illuminati" here. Brad Pitt and friends have you all set up to lose your wealth. Why not "Do what the 1% do?" .... I mean unless you live by honor, morals, and ethics... but none the less... you have a family, or a company, or a team, you are part of.... why not protect them? You think coming here and "understanding"???? makes you enlightened... HA HA HA
(obviously, i am not a troll. A troll would write BWAAHAHA or something stoopid like that)
while your wealth and rights are stolen? You are enlightened by Brad Pitt while your wealth and rights are stolen???
go out to the pitch, the battle field, enter and compete. (hopefully the Ivy League bastids don't take your lunch... ) Fight the very same backstabbers at their own game. brad Pitt won't take you to that Fight Club.
The guy with the bag on his head is either from my daughter's college basketball team or a realist. Speaking of games, this one goes on til it doesn't. That is all you need to know for now (squaws.) YESSSSSSSSSSSSSSS YEEESSSSSSSSSSSSS
Perhaps Paxil would help?
Don't post when you have been drinking so much. You sound like an ignorant dick.
The Fed does not misunderstand anything. The Fed is a private banking conglomerate and is in it for The Fed. Are there really any assholes left out there who think the Fed works for the citizens of the US?
This is why the article gets a low rating. Just explain the Fed actions and their consequences and spare us the Fed is misguided shit.
Agree-the Fed knows exactly what they are doing. They have transferred wealth from Americans to globalist elitists. They have set up the police state to deal with the social chaos which will inevitably result. In the short term and immediate future, they have prevailled. Recent events indicate they will not succeed in their global hegemony and that world war (likely nuclear) will result. I doubt there will be a winner when that occurs -assuming the planet or at least the human species survives. They may be evil geniuses if their plan succeeds -if not they will all end up in the gallows-if we can catch them before they flee. The US is toast -the elites don't care - they will try to establish their base elsewhere if the US goes down in flames.
Another TEOTWAWKI Phoenix Capital article!
The 891st in the last 5 years. Markets should rally like crazy tomorrow!
If this scenario, you’re not going to go out and start living high on the hog. You are going to start being more frugal and careful with your expenses because money is not coming in at the pace you’d hoped."
Very, very few people have anything like $1 million bucks in a retirement account. The vast majority of baby boomers have little put away for retirement.
How could they?
For the last 4+ decades they have been prey to one recession after another, not to mention the 70's and 80's inflation, and high joblessness, or mostly lousy-paying employment (just like these days). Those were the years that our insipid outsourcing began, which has lead to today's third bubble about to explode. Indeed, EVERYTHING we are experiencing now has either been CAUSED by that madness, or else, has resulted in the warping efforts the delusional are using to deal with it.
We haven't been right economically since the 1950's, and if you were born in the early 60's, you BEGAN life in a recession.
There's been little let-up since either; struggle and indebted efforts to get ahead is all many have known. That, along with the rise of inordinate--and unaffordable--social spending necessitated by joblessness and poor incomes. LBJ's Great Society and the Vietnam War introduced us to perennial deficits that his successors, on BOTH sides, would send to the heavens.
Meanwhile, fewer and fewer solid jobs were being created, and many of those were ultimatlely sent abroad. Worst of all, they were replaced with nothing. And that "nothing" continues to dog us in the form of poor consumers today not spending, since the easy credit of the last decade has so many strapped-in tight, and unable to delever.
What pisses people off is this obstinance to admit our faults openly before soliciting sacrifice to make the profound changes everyone KNOWS are inevitable. We will not get better until we own our crap from the top down. That's government (regardless of party; they're ALL hacks), corporations, and the individual. Indeed, everyone could use a refresh about the difference between right and wrong, as well as responsibility to bigger principles. It's high time unbridled capitalism came in for a major moral check-up, too.
We clearly can't go on this way, whether we crash, or not. After all, what is the point beyond a relative handful benefitting at the expense of so many, over and over?
Wall Street's obscession with stock prices, without regard to Main Street's wellbeing, is as wrong as the Fed's interest rate game that fuels it. Ditto for the stupid jobs reports; without substantial and rising incomes attached, what difference do those numbers make?
None.
Were that not true, the pundits wouldn't still be chasing numbers so long AFTER the beginnings of a claimed recovery. There is NO recovery, yet the bastards WON'T admit that.
And THAT'S what boils the public's blood.
Ditto with the inane shack racket. The body politic has become addicted to these things (as an imagined source of "wealth") simply because asset inflation is much easier to engineer than is a legitimate recovery. This pseudo-wealth, always dependent upon greater fools, mimicks the dope effect buybacks have had on stocks. All is a shell game that will lead to collapse, but no one tries to stop it.
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I've noticed that Phoenix Capital, has obviously missed the memo, because this is not 'misunderstanding', or 'ignorance', or even 'poor management' at the central bank level. This is reality, this is and has been intentional, and not just by a few, rather internationally organized in scope and deadly direction as it is, this has always been the intended direction. This is not about seemingly knee jerk reactions that the Fed & the Treasury accomplish quite well, that destroy fundamental economic standards, go hand in hand with continued deregulation & obfuscation, unrelenting wars both domestic & abroad, and drunken justice.
To imagine this is somehow unintentional is unrealistic. To believe the Bernanke when he says he was trying to save the seniors 8 or more years ago by reduction of interest rate, is just as unrealistic. Those savers, those retired ones 8 years ago did in fact eat their principal savings, and by now would be lucky if any of it is left. Nobody holds Certificates of Deposits for years now.
This period is not called the New Normal for nothing, and it certainly isn't called the New Normal because of some unintentional leadership decisions.
What did GW Bush hammer every citizen over the head with before he went out in a blaze of glory? 'Git a 401K, SocSec is bankrupt', and then meets with Sen. Obama & McCain in the oval office just before the election, so THEY can make sure of the intentional direction thru the '$700B swindle', submitted by the Bernanke, Cox, Baird & Paulson.
Well what exactly happened thereafter?~~~immediately everyone's 401k got zapped, as in crushed financially when the stock market crashed in 2008. AIG got bailed out, and the intended direction was well underway, with the likes of Barney Franks, Dodd, Schumer acting like...doing what they do best, creating more laws that support the New Normal direction. Savings was already crushed by the time Obama was propped up in office. The unregulated shadow banking/housing mortgage fiasco became the main attraction & the New Normal began to get a little hair on it's chest. Just in time for the intentional stock market, commodity, & the credit escalation, it doesn't seem to matter within the New Normal that the accounting doesn't jibe, assets are over valued, or over rated, oft times being just plain fraud, and to publicly announce this is somehow 'misunderstanding' adds fodder for their cannon.
wwxx
All "money" ends up in the Alps. The "paper" ends in vapor.
https://www.youtube.com/channel/UCz84cLA1kFgUwbiFm3J4fvQ
Only one rule "maintain those at the top"!
So lets create all the value we want and recaptialize the banks.
Got it and it worked too - fucke me thats a first.
I wonder what part they will get right next?
Read The Creature from Jekyll Island. The Fed and the .gov are doing what they do best.
Dude, the people here wrote that fucking book.
Hell no ... I'm going to keep right on working and deny some young guy a job. Tough shit junior ... your parents voted for people who let half of India and Mexico to move here to drop wages, so you're the one who's not gonna work!
Thats just plain mean. Go eat catfood and give junior a chance at a job.
True, but the Fed also thinks that since a strong economy will generate inflation, (in a free market economy this would be temporary as supply ramps up) that if they create inflation, voila, a strong economy will manifest itself.
But rising prices without rising wages will result in a depression because consumers can't buy as much, so production declines. That is what we are seeing now.
Phoenix, you make me so mad. QE was never meant to create inflation. It was meant to recapitalize the banks. But the banks are so crooked and broken, that didn't even work.
Exactly!! Someone gets it. Every bank in the world was broke. All QE ever was- was an effort to recapitalize broken balance sheets with ZIRP and subsequently rip savers off and reduce their savings rates to nil.
Everything else is just bullshit that they feed to the sheep. Put Occams razor to this.
Spinone, you are correct in that it was meant to recapitalize the banks, and it did work, it is simply what the banks next did: loans to corporations they covertly own or partially own, which then used those loans to do stock buybacks!
With the other monies, the banksters further propped up the markets with proprietary trading, either outright or through their hedge funds, etc.
It worked perfectly as far as the banksters are concerned, and how could prices rise in a non-rigged economy?
With falling retail sales, which correlate to real lowered wages and the Census Bureau data awhile back indicating that one out of every two Americans classifies as poor, the situation is exactly what it appears to be, government fantasy numbers and reports notwithstanding!
The Fed doesn't misunderstand anything. They have a printing press with enforced monopoly, and do what anybody with else would do in that situation.