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It's Not The Economy Stupid: It's The Fed
Back in the early 90’s during that era’s presidential campaign James Carville coined the narrative “It’s the economy stupid!” as to have his operatives rally around and focus their attention in a singular direction. Not only was it a brilliant strategic meme, it continually gave clarity to near everyone as to exactly what was “the” problem affecting everything.
Regardless of one’s party affiliation, discounting the simplicity and power contained within that simple line is to do so at one’s peril. For we remember it today decades (yes decades!) later because of its simplistic brilliance and effectiveness. During that period – if you weren’t talking and answering questions that were economy specific – nobody listened, nor cared. It was all about jobs, wages, GDP growth, etc., etc.
Today many are talking about the economy, but that’s all they’re doing: talking. Doesn’t matter if its today’s politician, CEO’s from the largest corporations, some national or regional business association figure-head, right down to academia with its self-perpetuating gaggle of Ivory Tower economic aficionados. All they are doing is paying lip-service to the problems. And the reason? They can’t do anything about it because as of today, the U.S. economy is being controlled high-handedly by The Federal Reserve. The U.S. economy has never before been under the command and control of a single entity – until now.
Some will scoff at the notion at first, however, all the proof that is needed is to look honestly at what out capital markets have morphed into over the last 7 years. The once great symbolic face and engine of capitalism, as well as its economic might and capital creation has been reduced to nothing more than an interface for a handful of wiz-kids with no business or economic prowess; just a Ph.D or specialized knowledge in mathematics or algorithms as to program High Frequency trading programs to skim or front-run provide liquidity for the “free money” pumped into the capital markets via the myriad of QE programs facilitated, and only made possible by the Federal Reserve. That’s not capitalism – that’s interventionism which fuels crony capitalism – pure and simple.
What remains currently since the true business and economic principles of supply and demand were pushed aside, then out entirely as we have understood them for over 200 years is what you have today is : A casino housing well-connected players. Nothing more – nothing less.
Remember not all that long ago where if it were learned, or was rumored, one approached the Fed’s “window” the implications as well as concerns it raised? Now? That window is seen in no different a light than the one located at any casino worldwide. Where one picks up their “chips” to play their index game of choice. Again, think about that for a moment and try to differentiate the difference between the two. Unimaginable just a few years ago. Today? It’s not only imaginable – its reality!
This issue has created a scenario that’s befuddled the so-called “smart crowd” yet is glaringly obvious to anyone with a moniker of business acumen.
The academics argue in some form of circular logic chain for not only the initial intervention, rather, as for its continuation in near perpetuity wrapped in a “chicken or the egg” type quandary or construct. i.e., “Without aggregate demand the rule is for intervention as to foster that demand.” The problem? The intervention is stifling, if not out right killing, any self-generating aggregate demand.
There’s no reason to start a new company or expand one when your competition is not only able to remain or compete when by-right they should have closed long ago, but have gained even more favorable attention within the capital markets via funding stock buybacks and dividends as their business model disintegrates. Situations like this are only made possible with a Fed’s more than accommodating stance in access to near “free money.” Period.
Why invest in the prospects of possible innovation when the sure thing of higher compensation to board members or CEO’s is there for the taking via the low hanging fruit of financial engineering the company into oblivion? Get rewarded today for “right sizing” or “downsizing” or whatever it’s called today to cover the ugly truth of firing as many as possible while keeping the doors open in some business that should have gone out of business entirely long ago. This doesn’t “save jobs” it destroys them. It’s out of that creative destruction that new or better companies emerge that hire.
Is there pain at times? Of course there is. However, as I’ve said many times “”Trying to alleviate that pain via unsound business practices will only increase the severity of that pain which can not be eliminated down the road.”
Remember, what you don’t (or won’t) do in this environment is what you’ve known as fundamental businesses practices when the name of the game is “dance till the music stops.” Regardless whether the company’s shoes have holes or worse.
Unwanted or irrelevant businesses remain alive to compete with young startups hindering true market forces to allow innovation and better products to come to market as the upstarts need to waste valuable resources competing against behemoths that would have collapsed under their own weight if not for their access to the “free money” still sloshing around.
If the upstart doesn’t have access? They’re at a competitive disadvantage near impossible to overcome. For if the bloated dinosaur has access to the money and the upstart doesn’t? Time attrition sounds the death knell of the upstart. While on the other hand: the genuine stalwart of a business that finds itself at the mercy of competition spawned by the throwing of that “free money” as to see what sticks by the “hot money crowd.”
Here there’s the opposite dynamic taking place with their ability to obscure true price discovery as they offers cut throat, or loss leading deals into that market made possible only through its available supply of that “free money” in what is now known as – a burn rate. Companies that would (or should) never have seen the light of a fund-raising door previously for out-rite comical business models have been greeted with open arms in a numbers game of “hope and pray” attitude of investing prowess. The job creation these types add have the staying power that make a may-fly feel like Methuselah.
Again: Why would any company invest its precious capital to take chances that may turn into tomorrows winners when the sure thing of spending those dollars till broke results in “winning” today?
And what about tax reform or business laws that may be hindering new or existing businesses making more and more non-competitive or the overburdening of antiquated fees, reporting requirements and far too many others to list here? No politician is going to seriously bang the table calling for reform to help incentivize growth when the Fed. can just supply advantages to today’s “winners” via its current steadfast stance to remain at the zero bound. Who needs competitive advantages when one has the advantage to access the Fed’s window or finance for nearly free? That’s a competitive advantage almost insurmountable, which in reality – is the best that money can buy.
Politicians and others talk about wage equality demanding hikes in the minimum wage, or a further enhancement to worker benefits and much, much more. And why shouldn’t they? Not only do they feel embolden they’re playing to a willing audience that sees itself as being “left behind.” Imagine that, a politician pandering to a group of potential voters preceding an election? Oh the humanity! Say it isn’t so!
The share prices of many of these companies have left previous highs far behind (as in when the financial crisis first hit) and now levitate at never before seen in the history of mankind highs. The argument is so easy to make to the economic or business unsophisticated as they try to square the circle of how their wages remain stagnant – and the CEO’s as well as Wall Streets grows, and grows, and grows.
Let’s not forget the glaring examples of what is not only seen as ironic, but to many, feels near criminal as they receive layoff notices only to read glowing reviews of how some of the banks that needed to be saved via taxpayer bailouts now tout their CEO’s as today’s newest entries into the “Billionaire Boys Club.”
They don’t understand the stock price is not rising for economic reasons (i.e., organic growth resulting in more net profits) but for nothing other than an over accommodating Fed. And no one wants them to know either. For if they did the next logical argument (or demand) will be: then where’s my bailout?! Or maybe they have. e.g, student loans and the call to just forgive them.
Add to this: What politician is going to call for government tax incentives for businesses to start, stay or come back to the U.S. when the selling of government debt is a non issue? After all; who needs fundamental economic policies when all that’s needed is for the Fed. to buy more with a keystroke created with “money” created in the same manner? The stigma or absurdity of a central bank monetizing or purchasing its own debt is not only no longer taboo – it’s now accepted as prudent monetary policy!
Today the Fed. entices nearly all businesses to focus on short-term games of financial engineering rather than on core business principles to grow. This is what a stance at the zero bound gives rise to. Short term solutions such as stock buy backs, or the jettisoning of labor or anything not nailed down which will fuel higher share prices enriching both the C-level executives as well as fast money chasers, while potentially over financing their companies into debt Armageddon, leaving them vulnerable should things unexpectedly turn sour. This is all that matters in today’s business dynamic brought forth by current Fed. policies.
Then, just when there’s hope that a start toward normalization is on the horizon – they move the goal posts. Again.
First we thought more than 2 years ago as the Fed. signaled it had strong incentives to do so which led to the what is now called “the taper tantrum.” Then surely they thought early last year – but that came and went. Then it was looking like before the end of last year which started a rout so precarious it took Fed. official after Fed. official to hearken tones of “wait, wait, wait, we’re kidding, don’t be so quick to jump” saving the markets but conditioning businesses to once again “sit on their hands.” Because clarity just flew out the window – again.
Now here we are going into Q3 and GDP forecasts are abysmal, earnings season has been tepid at best, delusional via Non-GAAP at worse. Yet, companies are besieged with conflicting reports stating “as long as you don’t count using 1+1=2 then everything is great for 1+1 now equals ___________(fill in what ever number makes you feel good.)
Until the Fed. get’s out-of-the-way and allows businesses and markets to function the way they’re supposed to – you will not entice any business to start, or expand, hire, and more which is desperately needed. It just doesn’t work that way.
Aggregate demand is fostered by customers buying things they want or need via companies that will supply them with it as they compete with upstarts and older competitors for market share creating a self actualized as well as sustaining market. The longer the Fed. remains inserted within those markets forcing out the true fundamentals that support them, and tries to act as the supplier of first and last resort itself – the longer it will be that we’ll see an ever-increasing distortion resulting in fewer jobs, lower GDP, and more.
I’m not that well versed as to argue all the minutia of monetary policy as to what is the exact time to intervene, or reduce all or any intervention. That’s for others far more knowledgeable than I care to be. However, it doesn’t take a genius to understand once the initial panic of the financial crisis had subsided it was time for the Fed. to relinquish its interventionism and allow the markets to seek its proper levels. i.e., let the markets clear. Only then could the true rebuilding of the economy start in earnest. For what we have to today is nothing resembling an honest economy or recovery. It’s nothing but a house of cards susceptible to even the smallest of tremors.
Think I’m off base? Then tell me how an increase of 1/4 of 1% of the Fed’s fund rate is seen today by many resembling a blinding terror? It would also seem the Fed. is doing far too much hand wringing and other things in an effort to avoid criticism. What they might actually be coming to the realization of is: they have in fact done far more harm than good staying this low for so long. And now what they’re worried about is the reaction to such a move in policy. Even one as ever so slightly raising just 1/4 of 1% which could chain react into an out-and-out rout. I’m of the opinion this alone is paralyzing them in the fear that all the ensuing outpouring of criticism could turn overnight into pitchforks leaving the obvious as crystal clear as the statement I began with.
That’s no way to run an economy. Especially this one.
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No.. it IS The Fucking Economy STUPID!
And Guess what?
IT STILL SUCKS!
The Federal Reserve should own responsibility for the broken economy since it is they who have instituted such mindless policy of fiat money printing.
Here’s a bit of totally useless news…
According to Reuters, Merkel says expects Lagarde to push for IMF role in Greek rescue.
This is going to be fun to watch – for the IMF to participate in the 3-rd bailout, Lagarde demands a haircut for Greece and Merkel rules it out. ;-)
Looney
http://www.reuters.com/article/2015/08/16/eurozone-greece-germany-idUSB4...
Shoot the Fed.
FED= GREEDY ZIONIST JEWS....
Why leave that out?
The problem is much bigger than the Fed . . .
Essay: Anatomy of the Deep State
February 21, 2014 by Mike Lofgrenhttp://billmoyers.com/2014/02/21/anatomy-of-the-deep-state/
"It's Not The Economy Stupid: It's The Fed"
No. It's not the economy, stupid.
No. It's not the Fed, stupid.
No. It's not the media, stupid.
No. It's not immigration, stupid.
Here's the tap root meme of truth...
"It's the ethnic group that controls them ALL, stupid!"
More acurately, the problem is with a Wall Street that operates virtually outside the bounds of the law, and a lack of a proper fiscal policy.
The central banks are using monetary policy to compensate for the latter issue in particular, but the tool inherently is less than perfect for the task.
Thx for the link....great read. Think I'll check out his book as well.
I am confused, why do we need the FED when we have a US Treasury?
dimwitted economist,
Role playing your screen name? Doing an MDB_?
When MDB_ trolls, it gives us well thought out material that makes us laugh because we get to see the twisted logic someone would have to have to take the outrageous stance represented in the post.
You can't just assert "it IS the Fucking Economy," you gotta show us why the folks who say the Fed is at fault are wrong. Take the trolling to the next level or GTFO.
The Federal Reserve is a for profit private bank created for the benefit of its shareholders, the largest banks in the world such as JP Morgan and Goldman Sachs.
That horse has been out of the barn since 2008.
That horse has been in the knackers yard since 2008.
Who makes a good central planner? A Fed banker?
The Fed had to do it to pay for / fund the 40 Million Illegals and the 47% collecting on the Federal dole, simultaneously.
I mean how else are you going to get the US to be less white ?
this article misses the point. the fed is the head of a private criminal banking cartel that has been in control of the US economy since 1913. it controls the price of money (currency), and by extension all prices in the economy. it also controls the supply of currency, which it prints into existence as debt. the fed doesnt need to get out of the way, the fed needs to be erased from the face of the earth and the creation of money, specifically debt free money, needs to be returned to the people.
Don't see how it can be done now.Like a patient with inoperable brain cancer, it die noe
on the table, or die a little later from the cancer.
Pick your poison ?
im not saying that it's particularly feasible to fix the problem i pointed out, but the author's notion that all we have to do is make the fed step back and stop intervention is completely missing the fundamental and underlying problems associated with the existence of a private central bank issuing debt based money supported by a fractional reserve banking system. he cant see the forest from the trees, so to speak.
There is no "fixing" anything. Our culture is fucked and you and I aren't in charge.
The people who are in charge are the ones who have ruined it and continue to do so. This is the best essay that I read during the week- speaks directly to this and why at any moment- the fat lady will start clearing her throat.
http://www.freemansperspective.com/wont-be-fixed/
fixing the economy is equel to getting rid of almost all of congress and about 1258 oligarchs who control 98 percent of the money and have direct access to the umpteen policing agencies and the military, plus nato. not to mention the shadowy rothchild empire behind the scenes.
like draining the ocean with cocktail straw.
think ill go about my affairs like the above mentioned don't exist.
have gay and jubliently awesome day in park, ha :-/
You are right of course. I think the part that bothers me the most is that we can see it coming and there is nothing we can do about it. We are forced to watch the country that we once loved and died for- murdered right in front of us. I guess in the annals of life and death and that shadowy stage- we are all playing our roles.
It's a shame. Had only a few things not been so corrupted, I think our Republic might have had a shot.
Federal Reserve = Moral Hazard
FYI
http://www.ribbonfarm.com/the-gervais-principle/
Part V, Heads I Win, Tails You Lose: In which we explore the world of capitalist creative destruction, in particular the basic heads-I-win-tails-you-lose pattern behind all Sociopath machinations, and its manifestation in the form of bureaucratic processes and divide-and-conquer politics.
http://www.ribbonfarm.com/2011/10/14/the-gervais-principle-v-heads-i-win...
"Federal Reserve = Moral Hazard "
Federal Reserve = ImMoral Hazard
The hazard is immorality is it not?
The US economy is under control of a single entity: hydrocarbons.
More absolute drivel from clueless idiots.
There’s no reason to start a new company or expand one when your competition is not only able to remain or compete when by-right they should have closed long ago, but have gained even more favorable attention within the capital markets via funding stock buybacks and dividends as their business model disintegrates. Unquote. And there is no sense in entrepreneurial activity anymore if there is no way to invest capital gained from risky activity into a low-risk and positive yielding asset. These times are gone. You can only put your money in bubbles.
And hope you can time your exit without getting wiped out, even though you are trading in a casino where you are up against computers who not only can trade faster than you, but they trade in tandem together and skim, frontrun, or stop you out.
It's not wise to fool with mother nature, and that is exactly what is going on.
Just wait until the fed starts buying corporate bonds. There is no end to this. QE4 is going to be QE3 plus corporate bonds.
the fed is all powerful which means it can take enough bad debt onto its balance sheet to self destruct. just think of Fannie Mae on steroids. the fed wont disappear but it will become what it always was, a government sponsored entity, and an off balance sheet receptecle for bad paper.what does the world look like the day after the fed is shuttered, thats a real good question. some nativists will say the government shouldnt hold corporate debt, but they have been bailing them out for years, so the argument goes on deaf ears. the new fed is probably the IMF, which we control. and the neocons will salivate over the chance to use foreign reserves held at IMF against their enemies, via sanctions and financial warfare. the IMF plan as it stands crushes the EM, its a machievellian idea and neocons will definitely want to be able to pull those strings
Central planning was invented by Joseph Stalin.
Pick up a book. Central planning has existed for thousands and thousands of years... and it sucks ass
central planning built the pyramids just a few years before Stalin
End game. They are the goldfish overfed by the toddler. They will gorge themselves until the end. They simply do not fucking care about anything else. Their financial excesses have been won on interest and externalities. They think they can outrun the consequences of their evil deeds forever, but they've hit a wall; the ZIRP wall. It's clearly over.
I had a springer spaniel once that would run headfirst into walls.
Amazing how long he continued before he realized he was hurting himself.Years.
That's funny. My sister had a Springer Spaniel and that dog would run to the end of the leash, 25 feet and get stopped suddenly as she ran out of leash. Did that over and over. The dog never learned. A car would go by she would run full speed and BAM the leash would yank her back. Really stupid dog.
The Creature from Jekyll Island. ...more like the malignant shit stain from Jekyll Island, passed on December 23rd when no one was there to complain.
It's a sad day when an individual or country is forced by a system to trade honest work and resources for dishonest money created by a banking monopoly. The private sector working chump is like a hamster on a wheel. To speak out or rise up against the monopoly will not be tolerated and will be quelled by an iron fist. Get to understand today's domestic and foriegn policy ASAP.
in 1913 the fed was tasked with stripping every asset not tied down in this country....102 years later they still have a little work left. until everyone is a debt slave their job is not yet complete
https://www.youtube.com/watch?v=Baicy_oPOmM
I had a decent day yesterday. A guy who owes me a thousand bucks called me back finally. I knew he was good for it as we have known each other for a long time. I changed the terms though and ordered up an ounce of premium dope because I am running low. I told him that I do not want shitty Mexican schwag specifically because that shit is not dope but rather rope. Anything that takes more than one hit is ditchweed. He knows what I want and said it might take a few days. Yeah, well, what else is new? He asked if I wanted a 1K worth of dope. No thanks. I have never been a dealer and never will be.
So how is that "War on Drugs" working out? Not so good eh? These fucking idiots that are .gov can't stop anything. I don't know just one guy I can get shit from either. The cops can fuck off even if it is done over the phone because when I order "that" that is exactly what it is. Just that. I clearly have no problem acquiring illicit inebriants and never have.
I read McMolotov's rant on another thread. McMolotov said that ZH has gone to shit. I really like McMolotov's posts but I disagree. I think many good bloggers have went silent for whatever reason. Hey, I was smoking up with my Bulgarian friend the other night and he said he was not sure about some of the articles he reads on ZH. Fair enough assessment but I retorted that the comments are what is worth reading most of the time. Remember, this is the guy who asked me why I am so different than other Mericans. I should not have had to explain why that is but he has only read a few articles.
The fact of the matter is this, we will do whatever the fuck we want to do. I have no intention of hurting anyone but myself but that is my fucking choice and not yours. My assets are pretty well hidden except for the vehicles. Fuck the statists. I would like see some fucking statist prick come after me and try to figure out just how I managed to not be in debt anymore. The fact that I can win any argument with anyone who is in debt is a powerful tool. I owe no one ANYTHING. I will NOT COMPLY with your rules if I don't want to and that really pisses a lot of people off because they know I am correct and there is nothing they can really do about it. I worked my ass off to get to this point in my life and I will have to keep working my ass off to maintain it and I will.
I am a busybody more than anyone knows. Sometimes I don't even realize that I am doing something to try to generate FRNs. I only see more things that I know I can do and try my best and it does not always work out. Putting all of these latest PM coins away would be a good thing to do for example. I can never walk away from someone who needs help. I stop and give fiats to people standing on the corners passing through St. Cloud MN who are hard on their luck but I always want to hear an explanation as to why. I pay them for their story and help them along. I do so because one day I might be homeless and sitting under a bridge abuttment with a stack of silver, gold, crates of ammunition and a shitload of guns. That was my financial choice. You can honk as you drive buy if I am wrong.
the above just barely scratched the surface of the fed induced shitstorm that is coming. market and economic distortions are currently so hideously large and grotesque that when they come to light people will be vomiting in the street. when the shtf even zirp won't be enough to save it. the whole "world eCONoME" is a crumbling edifice that the fascist bankers, the fascist military, and the fascist gubbermint won't be able to hold it together. i give it ten years, twenty tops. repent bitchez, the end is near.
The Federal Reserve.
Proudly fucking regular people out of their money since 1913.
It sure looks to me that fiat magic is all the keeps these monopolies standing. Well that and regulatory capture.
In my view its all been weaponized to shit. In industry after industry fiat has reduced the value of everything it touches. Energy,transportation,food,Medicine,water,MIC,FIRE and on and on.
In contrast true inovation is hunted down and killed even if they must change the rules to do it. As a prime example the coal industry is being shuttered up in favor of shit that is known to not work. Take away the fiat magic and coal gets inovated to the point where energy is no longer a concern.
It occured to me that Tyler Durden in a post or posts in the ZH archives claimed that economics is not a 'science', but like phsychology is a 'wannabe' science. I do not remember the exact terms so I paraphrase.
So what does ZH do?
Throw all kinds of graphs, explanations and so on at us trying to explain the 'true' economics of the situation at it's readers or it allows guest 'posters' to throw the physchology of economics at us.
That is why the world has not ended for most of in respect to finances, as no one has any clue.
I find it interesting how many of us, including myself, get caught up in this when there is a timeline for each of us to attend to waiting for us to live it. :)
Elul 29 only 4 shorts weeks away.
I always thought the Galts of the world would stop the economy dead in it's own tracks.
I was wrong. It has been a group of self-righteous assholes who have worked at the Federal Reserve since 1913 who thought they figured out how to give all the freeloaders a free ride, to borrow demand from the future to make things appear better today, and who have not been right about what ails us since 1913.
End the Fed. End the Misery.
We'll do the heavy lifting.
Who is John Galt?
Arrest them. They won't be able to support the military before long.
In any financial crisis/currency collapse scenario they will not be able to pay the goons. That is their glaring Achilles heel. The bankers, politicians and gray haired pentagon brass think the soldiers will follow them anyway with no pay. They are deeply delusional. Many will be Ceaucescu'd.
The always-next-quarter rate hike will come, and it won't be the quarter-point everyone is expecting. It will be a mere tenth-point, yep one tenth of one percent; and in the ensuing shit storm, they will not only reverse the tiny one-tenth increase, they will go DOWN even further. From the currently insane .25 rate...all the way down to .10%.
To quote the great prophet Bruno Mars: don't believe me? Just watch.
how many trillions of dollars does the world need
.
1000 trillion???
not even close. 7 billion trillion might do, that would be 1t for each person on the planet. We could by cars, houses, educations, and still have enough left for Starbucks.
Guillotine the Fed.
Liberty is a demand. Tyranny is submission..
"Return" Zion.
For higher page views try "it's not the economy it's the government."