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Yellen Responds To Allegations The Fed Is Responsible For America's Record Wealth Gap

Tyler Durden's picture




 

Earlier we noted what we think was the most important thing Yellen discussed today, namely the potential for the Fed to usher in negative rates and as much as she Yellen felt clearly uncomfortable discussing NIRP at a time when the Fed was supposed to take a victory lap with its first rate hike in 9 years, she admitted that the Fed "would look at all of our available tools. And that would be something that we would evaluate in that kind of context."

What else did she say? Below are the key comments on various economic issues as summarized courtesy of Bloomberg.

On the Rate Outlook

"The recovery from the Great Recession has advanced sufficiently far and domestic spending appears sufficiently robust that an argument can be made for a rise in interest rates at this time. We discussed this possibility at our meeting. However, in light of the heightened uncertainties abroad and the slightly softer expected path for inflation, the committee judged it appropriate to wait for more evidence, including some further improvement in the labor market, to bolster its confidence that inflation will rise to 2% in the medium term"

"Every meeting is a live meeting where the committee can make a decision to move to change our target for the Federal funds rate. That certainly includes October”

On Unemployment

"Although we are close to many participants’ and the median estimate of the longer-run normal rate of unemployment, at least my own judgement, and this has been true for a long time, is that there are additional margins of slack, particularly relating to very high levels of part-time, involuntary employment. And labor force participation that suggests that at least to some extent the standard on employment rate understates the degree of slack in the labor market. But we are getting closer. The labor market has improved. And as I’ve said in the past we don’t want to wait until we have fully met both of our objectives to begin the process of tightening policy given the lags in the operation of monetary policy”

On Below Target Inflation

“An important reason for that is that declines in import prices, reflecting the appreciation of the dollar and declines in energy prices, are holding down inflation well below our target and well below core inflation. We expect those effects to be transitory and with well-anchored inflation expectations we expect inflation to move back to 2%”

On International Developments

“We reviewed developments in all important areas of the world but we have focused particularly on China and emerge markets. Now we have long expected and most analysts have to see some slowing in Chinese growth over time as they rebalance their economy. And they have planned that. And I think there are no surprises there, The question is whether or not there might be a risk of a more abrupt slowdown than most analysts expect. And I think developments that we saw in financial markets in August in part reflected concerns that there was downside risk to Chinese economic performance and perhaps concerns about the gaps where policymakers were addressing those concerns; in addition we saw a very substantial downward pressure on oil prices in commodity markets”

On Fed-Induced Uncertainty

“I know that of course there is uncertainty about Fed policy. As I mentioned, we’re well aware that there’s been a huge focus on the decision today. And you know, I would ask you to appreciate that there are a lot of cross currents in economic and financial developments that we need to take into account in deciding on what the appropriate course of policy is. And we don’t make continuous decisions every single day about our policy. We meet periodically. We do our darnedest to pull together the best analysis we can”

On Housing

“we are envisioning further improvements in the housing market. It remains very depressed. Housing starts below levels that seem consistent with underlying demographics especially in an economy that’s creating jobs and we have lots of people who are still doubled up and demand for housing should be there and should materialize as the job market improves and income growth improves. So are we counting on it? Housing is now a very small sector of the economy it’s not the driver of -- it is not the key driver in my own forecast of ongoing improvements in the U.S. economy”

On Budget Standoff

“It played absolutely not at all in our decision I believe it’s the responsibility of Congress to pass a budget to fund the Government to deal with the debt ceiling so that America pays its bills. We have a good recovery in place that’s really making progress and to see Congress take actions that would endanger that progress, I think that would be more than unfortunate”

* * *

Last but not least, here is here response to allegations the Fed creating the biggest wealth divide in US history: "Do you think the Fed has widened the wealth gap with its low interest rate policy? These people say low interest rates mainly benefit the wealthy.

"Well, I guess I really don't see it that way. It is true that interest rates affect asset prices, but they have complex effect through balance sheets, through liabilities and assets. To me, the main thing that an accommodative monetary policy does is put people back to work. To me, putting people back to work and seeing a strengthening of the labor market that has a disproportionately favorable effect on vulnerable portions of our population, that's not something that increases income inequality. There have been a number of studies that have been done recently that have tried to take account of many different ways in which monetary policy acting through different parts of the transmission mechanism affect inequality, and there's a lot of guesswork involved, and different analyses can come up with different things. But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality.

Well, if a paper written by an economist said so, then it must be true.

Source: Bloomberg

 

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Thu, 09/17/2015 - 18:18 | 6562598 ThirteenthFloor
ThirteenthFloor's picture

Well deny, deny, deny, chances are most don't know better.

Thu, 09/17/2015 - 20:13 | 6563026 MrTouchdown
MrTouchdown's picture

It's not official until it's been denied.

Thu, 09/17/2015 - 21:50 | 6563406 Jumbotron
Jumbotron's picture

"But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality."

 

Yeah.  It was written on TOILET PAPER and it was FULL OF SHIT !! "

Thu, 09/17/2015 - 18:19 | 6562602 RopeADope
RopeADope's picture

I see what she did there. She baffled everyone by talking about income inequality instead of wealth inequality. In her perverted mind she was not lying.

Damn, that sociopath got the better of us again!

Thu, 09/17/2015 - 18:39 | 6562696 centerline
centerline's picture

Nice catch.  Same sort of word play that has destroyed this country.

Thu, 09/17/2015 - 18:48 | 6562741 Amish Hacker
Amish Hacker's picture

I'm still waiting to hear what the definition of "is" is.

Thu, 09/17/2015 - 18:55 | 6562767 centerline
centerline's picture

lol.  I got kicked off a site once for pointing out how language really has been key.  The elite use it very carefully because it is how they are avoid and/or leverage the legal system to which they have tremendous access and influence.

Thu, 09/17/2015 - 18:59 | 6562787 RopeADope
RopeADope's picture

This --> "The elite use it... to leverage the legal system"

Go read draft legislation and then the final versions in any state.

The drafts provide context for why laws are passed and this context is subsequently stripped out in the final by clever language assassins so judges/regulators/etc who are directed to look only at the letter of the law do the bidding of the elite criminals.

Thu, 09/17/2015 - 19:05 | 6562800 socalbeach
socalbeach's picture

Excellent. 

One's income can increase with no positive effect on wealth if one's expenses are increasing faster.  See my comment below.

Thu, 09/17/2015 - 19:39 | 6562921 sam i am
Thu, 09/17/2015 - 18:19 | 6562604 Nostradumbass
Nostradumbass's picture

Yada, yada, yada, back to your stalls goys...

Thu, 09/17/2015 - 18:19 | 6562609 Joebloinvestor
Joebloinvestor's picture

Cigarette smoking doesn't increase lung cancer either.

Thu, 09/17/2015 - 18:26 | 6562625 inhibi
inhibi's picture

She used baffleshitspeak: its this new thing the kids are doing. Very close to spewbullshitspeak, but less bull more baffle.

 

Also by she I mean blobfish-with-a-wig.

 

*EDIT: i wonder if BWAW would look better in a high pressure environment. Clearly not much pressure in the hallowed halls of the FED....

Thu, 09/17/2015 - 18:54 | 6562763 logicalman
logicalman's picture

Thanks for that.

I've been struggling to come up with what the Yell reminds me of, and you hit it...

Something from the lightless abyssal ocean depths!

I think she had the waving spine with the illuminated end removed surgically.

 

Thu, 09/17/2015 - 19:03 | 6562797 SillySalesmanQu...
SillySalesmanQuestion's picture

When she takes off her wig and makeup, she doesn't look like a thumb, she is Larry Summers in drag...aka Ms. Debtfire.

Thu, 09/17/2015 - 18:23 | 6562631 El Vaquero
El Vaquero's picture

Fuck you Yellin.  You aren't putting people back to work, you fucking hag!

 

https://research.stlouisfed.org/fred2/graph/fredgraph.png?g=1S1t

Thu, 09/17/2015 - 18:26 | 6562641 rguptatx
rguptatx's picture

So basically, yes, it does and you all may think so, and it is probably even true in large part, but we ELITISTS think NOT, because it is an inconvenient truth! Now put that in yer pipe and smoke that! Or, did I misread her response?

Thu, 09/17/2015 - 18:30 | 6562655 Atomizer
Atomizer's picture

The global world of masterminding wealth transfer in a NIRP environment. 

Eric ClaptonCocaine - YouTube

Thu, 09/17/2015 - 18:30 | 6562657 Not if_ But When
Not if_ But When's picture

I can't talk with ANYONE about the FED.  They immediately make comments about having trust in the FED and their belief that it is there to promote the health of the economy.  The faith and trust they show is truly sickening.  (they also consider me to be a nutcase and don't want to hear about it).  No wonder they are clueless about the reason for bubbles, bursting bubbles, resultant recessions, economic crises, etc which they just see as things about which the FED comes to the rescue and saves the day.

Thu, 09/17/2015 - 18:30 | 6562660 kliguy38
kliguy38's picture

She's such a bad con she can't even baffle um with bullshit .........so sad that our cons are inept too

Thu, 09/17/2015 - 18:30 | 6562663 Jstanley011
Jstanley011's picture

"Wealth inequality" is a left wingnut canard. "Watch the little birdie!" idiots.

Thu, 09/17/2015 - 18:38 | 6562692 El Vaquero
El Vaquero's picture

Not when it is the direct result of fraud.  Which it is. 

Thu, 09/17/2015 - 18:41 | 6562707 Jstanley011
Jstanley011's picture

The only solution that will work, in that case, is to prosecute any and all fraud.

Now tell me that that is the solution being proposed by the wingnuts blabbering about the "wealth gap."

Thu, 09/17/2015 - 18:46 | 6562728 centerline
centerline's picture

The blabbering wingnuts just want more forced redistribution.  They don't give a shit about the fraud because they either are skimming off the system or are so hopelessly brainwashed into believing a socialist utopia is right around the corner.

Thu, 09/17/2015 - 18:53 | 6562762 Jstanley011
Jstanley011's picture

WINNER-WINNER-WINNER

Thu, 09/17/2015 - 19:28 | 6562884 centerline
centerline's picture

chicken dinner?  (I tend to food motivated).

Thu, 09/17/2015 - 18:43 | 6562718 centerline
centerline's picture

Out of context.  It is a wingnut thing if we are talking any particular redistributive -ism.  In this context it is rampant fraud. 

Not being able to differentiate between all of this is the wool that is pulled over your eyes.

Thu, 09/17/2015 - 18:55 | 6562766 Jstanley011
Jstanley011's picture

Understand what Rahm Emmanuel meant when he said, "Every crisis is an opportunity," and you'll get it.

Thu, 09/17/2015 - 18:58 | 6562781 centerline
centerline's picture

For sure.  Nice to meet you J.  You took a cool spin on this part of the thread.  Drew some folks like myself right in!  I personally have some family in another state that are diehard wingnuts.  Drives me nuts.  I recently told my wife to just stop telling me what they are saying.  lol.

Thu, 09/17/2015 - 19:11 | 6562823 Jstanley011
Jstanley011's picture

Same here, center. Yeah, I've been watching the water temperature being slowly turned up to a boil on these frogs for many a moon. It has taken a while, but they're almost done.

Thu, 09/17/2015 - 19:26 | 6562880 centerline
centerline's picture

Sad thing is that we are in the pot so some degree.  I am feeling a little medium to medium well myself.  ha ha. 

https://images.search.yahoo.com/images/view;_ylt=AwrB8pPsS_tVZFsA2gcunIl...

Nasty big link.  But this cartoon of recent had me in tears I was laughing so hard. 

 

Thu, 09/17/2015 - 18:32 | 6562668 SofaPapa
SofaPapa's picture

When telling a lie, the lie must always be adhered to strictly.

Janet knows this.

Thu, 09/17/2015 - 18:57 | 6562669 socalbeach
socalbeach's picture

Let me explain it to you Janet. 

First, there's no evidence that QE or supressing interest rates has helped the real economy in any significant way.  What it's done is enable the wealthy and connected to borrow (from banks, who loan out customer deposits) at zero or negative real interest rates to buy appreciating assets.  This windfall represents purchasing power that is a claim on real goods and services.  But since these speculators haven't produced anything for their windfall, their increased purchasing power can only be realized by suppressing  others'. This is accomplished by rising prices for things like healthcare, food, rent, homes, and other assets, which disproportionately hurts those working for a living with few assets.

Thu, 09/17/2015 - 18:34 | 6562677 desirdavenir
desirdavenir's picture

Otoh, does this recent and comprehensive Fed study takes into account wealth inequality?

Thu, 09/17/2015 - 18:37 | 6562689 resaci
resaci's picture

We're all DOOMED!  The world is overrun by psychotic predators in pinstriped suits.

Bat shit maniacs will suck your blood dry...

Aaaaaghhhhhhhh!

Thu, 09/17/2015 - 19:17 | 6562847 RopeADope
RopeADope's picture

If you put a pinstripe suit on Yellen, people might mistake it for the Penguin.

Thu, 09/17/2015 - 18:41 | 6562710 Talleyrand
Talleyrand's picture

Negative interest rates. I'm feeling like the Tommy Lee Jones character in 'No Country for Old Men". "...I don't want to push my chips forward and go out and meet something I don't understand." So I gathered some metals and played pirate on the kitchen table for the first time in a long time. Feelin' better now.

Thu, 09/17/2015 - 18:44 | 6562720 Bunga Bunga
Bunga Bunga's picture

What is the paper Yellen is refering to?

Thu, 09/17/2015 - 19:02 | 6562793 Jersey_Mountaineer
Jersey_Mountaineer's picture

"The Fed Isn't Responsible for Widening the Wealth Gap", by Janet Yellen, PhD.

Thu, 09/17/2015 - 18:47 | 6562736 antonina2
antonina2's picture

That's the same load of shit she has been pelting the last few meetings!  We will have negative rates if what she is saying is true, cause the shit they are doing just ain't working Johnboy! You think maybe we should try something else? Naw, it only didn't work the last 1000 times, maybe this time will be different! Gawd, these people belong in the mental hospital and kept away from all adult level decision making! What a freaking shit show! I can't believe I have to share the term human being with them!

Thu, 09/17/2015 - 18:49 | 6562745 moneybots
moneybots's picture

"But a pretty recent paper that's quite comprehensive concludes that the -- that Fed policy has not exacerbated income inequality."

Raise the FED rate to the rate of inflation and watch what happens to income inequality that the FED pretends it hasn't exacerbated.

 

 

 

Thu, 09/17/2015 - 18:49 | 6562750 MonetaryDigitalis
MonetaryDigitalis's picture

There is no such paper, she lies.  End the Fed.

Thu, 09/17/2015 - 18:51 | 6562756 XRAYD
XRAYD's picture

The Supidity is obvoius!  But one needs a brain to connect the sunrise to day light. And darkness to its setting.

Thu, 09/17/2015 - 18:52 | 6562757 RighteousDude
RighteousDude's picture

These people will NOT give up their POWER.

 

We must take it from them using all means possible.......

Thu, 09/17/2015 - 18:56 | 6562773 starman
starman's picture

"labor market"? you mean SLAVE market?

Thu, 09/17/2015 - 18:57 | 6562777 Jersey_Mountaineer
Jersey_Mountaineer's picture

I read that paper, it was pretty convincing.  It was written by an ECON 101 student at Montclair State.  It got a B-.

Thu, 09/17/2015 - 18:58 | 6562780 Seal
Seal's picture

The Fed is a whore to the hedgies and the banks

Thu, 09/17/2015 - 18:59 | 6562786 Atomizer
Atomizer's picture

Yellen forgot to read her bosses September 2015 bulletin, released on the 13th

This reminds me of captain kangaroo and moose dropping the ping pong balls. 

https://www.bis.org/

Thu, 09/17/2015 - 19:02 | 6562791 Brokenarrow
Brokenarrow's picture

filthy, lying. corrupt, evil whore

Thu, 09/17/2015 - 19:04 | 6562801 Goldilocks
Goldilocks's picture

Muppet Movie - The Rainbow Connection
http://www.youtube.com/watch?v=jSFLZ-MzIhM (3:21)

Rainbow Connection The Muppets 2011 HD/3D
http://www.youtube.com/watch?v=adDgaBZFdTM (2:42)

Kermit The Frog - Rainbow Connection Lyrics

Why are there so many songs about rainbows
and what's on the other side?
Rainbows are visions, but only illusions,
and rainbows have nothing to hide.
So we've been told and some choose to believe it.
I know they're wrong, wait and see.
Someday we'll find it, the rainbow connection.
The lovers, the dreamers and me.

Who said that every wish would be heard
and answered when wished on the morning star?
Somebody thought of that and someone believed it.
Look what it's done so far.
What's so amazing that keeps us star gazing
and what do we think we might see?
Someday we'll find it, the rainbow connection.
The lovers, the dreamers and me.

All of us under its spell. We know that it's probably magic.

Have you been half asleep and have you heard voices?
I've heard them calling my name.
Is this the sweet sound that called the young sailors.
The voice might be one and the same.
I've heard it too many times to ignore it.
It's something that I'm supposed to be.
Someday we'll find it, the rainbow connection.
The lovers, the dreamers and me.

Thu, 09/17/2015 - 19:09 | 6562822 Atomizer
Atomizer's picture

Thanks Janet. You just gave away the farm. We know were the put the sideline money, it's not with Wallstreet. The two of you can bleed to death. 

Thu, 09/17/2015 - 19:20 | 6562858 Not if_ But When
Not if_ But When's picture

MYSTERY SOLVED:

If you want to see why 99% of the population is clueless, just read the coverage in your daily newspaper about the FED not increasing rates.

I read the Philadelphia Inquirer coverage.  They have the most shallow, unknowlegable coverage imaginable.  And these types of articles form the typical person's opinion.  BTW, I read it online like many people now do with major newspapers.

Thu, 09/17/2015 - 19:24 | 6562870 I Write Code
I Write Code's picture

All Fed meetings should be held on live feed video.

All Fed actions should be posted within an hour, Fed inventory should be viewable online.

And someone needs to tell maroons like Yellen there are limits to what monetary policy can do, and she should stop pretending you can use it to bake a cake.

Thu, 09/17/2015 - 19:32 | 6562894 PrimalScream
PrimalScream's picture

The FED has become one of the most striking examples of human psychological blindness .. a small group of people who are completely entrapped by their own point of view.

These people are worthy of intense pychological research.

Thu, 09/17/2015 - 19:37 | 6562914 Womb Service
Womb Service's picture

Janet needs to watch this:

https://www.youtube.com/watch?v=jt377DV2BKs

Thu, 09/17/2015 - 19:39 | 6562924 FreeMoney
FreeMoney's picture

So correct me if I'm wrong here.

The discount rate is zero.  So basically If I was a giant commercial bank I can borrow 99% of the 5yr tbill over night for zero by pleding it as collateral.  The 5 year is paying 1.53% on the market.

So basically I can do this every day and make the 1/2 percent ?

Thu, 09/17/2015 - 19:51 | 6562964 bankonzhongguo
bankonzhongguo's picture

It does not matte how many letter after your name, your title or all the statistics you want to throw around.

Regular people and their entire families - young, old, middle income and the poor are getting rapped by the big corporates and their lackeys like Yellen.

Until a high profile billionaire and their family gets offed in some political fashion the rapping will continue.

 

 

Thu, 09/17/2015 - 19:51 | 6562967 Youri Carma
Youri Carma's picture

If you call a record low Labor Force Participation Rate 'slack' you're nothing more than a freakin fat little mental patient.

Thu, 09/17/2015 - 19:58 | 6562984 franciscopendergrass
franciscopendergrass's picture

Yeah, putting people back to work.  You mean putting banksters back to work.  You, short, fat munchkin fuck

Thu, 09/17/2015 - 19:58 | 6562987 Taras Bulba
Taras Bulba's picture

At least there is one competent Central Banker in the world, probably only one:  she is the  woman in charge of the Russian Central Bank.  She did real work in the face of the unbelieveable sanction against her economy and she achieved results.  I know, that is not a common phrase used to describe activities of the central  banks in the West.

http://www.rt.com/business/315692-cb-russia-award-euromoney/

Thu, 09/17/2015 - 20:10 | 6563015 yogibear
yogibear's picture

The Federal Reserve is a dusgusting group of banksters.

The Ponzi can go on for a while. Someone said 2 years, 3 years ago it would fail. 

Next in negative rates and QE4 for the banksters and their stocks. 

Thu, 09/17/2015 - 20:15 | 6563033 khakuda
khakuda's picture

I used to have debates with a guy at work 25 years ago. When he was losing, he would always say "well I have a paper that proves my side."

No one ever saw it.

Thu, 09/17/2015 - 20:45 | 6563157 starman
starman's picture

How's this for a theory; 

Inflate every asset so the surfs will only have money left to eat, rent and commute!  

Keynesian economics achived! 

Thu, 09/17/2015 - 21:35 | 6563340 Ban KKiller
Ban KKiller's picture

Easter Bunny and Tooth Fairy! 

Oligarchy/Plutocracy 2016    

Thu, 09/17/2015 - 21:36 | 6563346 Sizzurp
Sizzurp's picture

The government loves to hear about income inequality because their repsonse is always to tax more so everybody is poor.  Then they say look, problem solved.

Thu, 09/17/2015 - 21:48 | 6563396 Wilcox1
Wilcox1's picture

My Mom was a government worker who went senile too. Thank goodness she wasn't the fed chair.

Thu, 09/17/2015 - 22:43 | 6563589 nnnnnn
nnnnnn's picture

in senile condition you mother would do better than all previous chair members combined

Thu, 09/17/2015 - 22:34 | 6563561 Midnight Rider
Midnight Rider's picture

The problem is that ZIRP has lured money away from true economy growing activity into nothing more than an attempt to speculate and front-run the Fed in the financial markets. This is the way they have been destroying the economy for the last six years with the undisclosed goal of propping up banks which can no longer stand on their own without the Socialist support of the US government. Pretty ironic for a bunch of Socialist hating bankers. I guess it's only Socialism if it's applied to something other than banking.

Thu, 09/17/2015 - 23:13 | 6563681 starman
starman's picture

"Housing is now a very small sector of the economy it’s not the driver of -- it is not the key driver in my own forecast of ongoing improvements in the U.S. economy”

No shit bitch, it's auto loans student loans and credit card debt!

Welcome to Keyneshia! 


Fri, 09/18/2015 - 00:05 | 6563814 COL Jackson
COL Jackson's picture

"Well, if a paper written by an economist said so, then it must be true."

And that is why I keep coming back to ZH.  Well done Tyler(s).  The trouble with the central planners is they know so much which isnt so.

Fri, 09/18/2015 - 00:56 | 6563919 tarabel
tarabel's picture

 

 

I feel much safer knowing that both Iran and the Fed are grading themselves in camera and passing out the summa cum laudes all around.

 

Fri, 09/18/2015 - 01:31 | 6563979 polo007
polo007's picture

According to Macquarie Research:
 
https://app.box.com/s/hx16540dwpct4uj5h5iohxsa4197zozd
 
Time for a policy U-turn?
 
Back to the future: British Leyland
 
From conventional QEs to more unorthodox policies…
 
- As discussed (here and here), we do not believe that investors are likely to benefit from acceleration in growth rates, trade or liquidity and indeed on the contrary, negative feedback loops from EMs to DMs imply that neither would be able to support global growth. Secular stagnation is the key explanatory variable (here). The deflationary pressures from overleveraging, overcapacity and technology shifts can be either allowed to work through economies or the public sector needs to continue resisting via expansionary policies.
 
- Since ’08, monetary policies were doing most of the lifting with limited participation by fiscal authorities (bar China). In other words, in the absence of either private or public sectors driving higher velocity of money, it was Central Banks that were supplying incremental liquidity to preclude contraction of nominal GDP and avoid stronger deflationary pressures.
However, marginal utility of incremental injections has been declining (witness much lower impact of recent ECB’s QE and increase in BoJ accommodation since Dec ’14).
 
- Part of the reason for monetary stimulus fading is that supply of US$ remains low. Global economy continues to reside on a de-facto US$ standard and current incremental supply is almost non-existent (depending on definition growing at +2%/-1% clip vs. average since ‘01 of ~15%). In other words, due to lack of recovery in the US velocity of money and lack of QEs, global economy is not getting enough US$ to continue leveraging.

 
…as efficacy of conventional monetary QE is questioned
 
- At the same time efficacy of continuing with conventional QE policies is being challenged and not just by independent observes but also ‘insiders’ (such as recent SF Fed paper). As velocity of money globally continues to fall, conventional QEs have to become exponentially larger, as marginal benefit declines.
If the public sector is not prepared to step aside, what other measures can be introduced to support nominal GDP and avoid deflation?
 
- There are several policies that could be and probably would be considered over the next 12-18 months. If the private sector lacks confidence and visibility to raise velocity of money, then (arguably) the public sector could. In other words, instead of acting via bond markets and banking sector, why shouldn’t public sector bypass markets altogether and inject stimulus directly into the ‘blood stream’? Whilst it might or might not be called QE, it would have a much stronger impact and unlike the last seven years, the recovery could actually mimic a conventional business cycle and investors would soon start discussing multiplier effects and positioning in areas of greatest investment.

 
British Leyland failed, but it might work at least for a while
 
- British Leyland (formed from nationalized British car companies in the late ’60s) destroyed its automotive industry but for a time it provided employment and investment. Central Banks directly monetizing Government spending and funding projects would do the same. Whilst ultimately it would lead to stagflation (UK, 70s) or deflation (China, today), it could provide strong initial boost to generate impression of recovery and sustainable business cycle. It could also significantly shift global terms of trade (to the benefit of commodity producers) and cause a period of underperformance by our ‘Quality & Stability’ portfolio and improve performance of ‘Anti-Quality’ screen. What is probability of the above policy shift? Low over next six months; very high over the longer term.

Fri, 09/18/2015 - 01:50 | 6564000 ShakaZulu
ShakaZulu's picture

"different parts of the transmission mechanism affect inequality"

 

In the mean time folks, just keep grinding along.  We do appreciate your efforts.

Fri, 09/18/2015 - 05:22 | 6564190 MarcusAurelius
MarcusAurelius's picture

How can it not widen inequality? The only ones who can borrow are the ones with good credit. Hence the wealthy. Buffet doesn't borrow his money the way us commoners do.Well he doesn't need to but if he did he gets nearly the same rate as the banks. Can he find a deal with essentially free capital even in times such as these? Sure he can. He'll buy more businesses that actually make it out of the depressed economy so he can pay his wealthy 1% dividends. He'll buy property at auction rates and he'll do what any good investment manager does. Take cheap money to make real returns. THEREBY FUELING MORE INCOME INEQUALITY JANET. 

    Pray tell how many 50K a year jobs that are in industry and manufacturing has the FED created? You know the ones that actually matter? Hmmm....seems to me from the Zero Hedge updates every NFP day, they have not really created any but rather they have been lost??? Could it be because there is NO demand for jobs like this? Nah...all that student debt is simply there because the stupid students overspend all the time. There are hoards of good paying jobs everywhere. 

 

Fri, 09/18/2015 - 05:51 | 6564216 gmak
gmak's picture

THe FED cannot raise interest rates, but they stil need everyone to think that they will. WHy? It's the only wy to slow down the bubble(s) that they have created with their ack of understanding as to how the financial physics works.  Money cannot be created or destroyed, it can only be stolen from the future. (not really, but it sure is a nice sound bite).

Fri, 09/18/2015 - 19:00 | 6567330 monad
monad's picture

Friday humor.

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