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Is The Fed Finally Being Forced To Consider Main Street?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
To help Main Street, the Fed simply needs to stop incentivizing speculation over investment and end policies that have shifted wealth and income to the top of the wealth pyramid.
If there is anything about Federal Reserve policy that is now widely accepted as self-evident, it is that Fed policies have further enriched the super-rich and vastly widened wealth inequality. That this is now mainstream is remarkable, for it completely blows apart the Fed's PR claims to be "serving the people" by boosting inflation and making it easy for the super-wealthy to borrow unlimited sums of new money at near-zero rates.
As I noted in The Federal Reserve, Interest Rates and Triffin's Paradox, there is no way Fed policy can be win-win-win for all participants. As I explained in Why the Fed Has to Raise Rates, the Fed's unspoken Prime Directive is maintaining U.S. and dollar hegemony, and this requires a strong dollar, which pressures exports and Corporate America's global sales and profits.
You can't it both ways: you can't weaken your currency to boost exports and retain a global reserve currency.
But the Fed is also in another lose-lose conflict: the public-relations fight for its political legitimacy. Though it generated very little news flow, you can be sure Fed insiders saw the writing on the wall when the House of Representatives approved a measure to audit the Fed--in essence, a move to bring the Fed to heel.
House passes bill to overhaul the Fed
If the Fed continues to enrich the super-rich at the expense of the rest of us, there will be political consequences.
The Fed is now being forced to deal with the blowback of its policies that have enriched Wall Street at the expense of Main Street.
So how can the Fed help Main Street?
While many voices are calling for guaranteed income for all or some other type of helicopter money, the Fed does not have the power or mandate to send free-money checks to every household.
The conventional wisdom is that zero-interest rates help Main Street by lowering the cost of borrowing to buy vehicles, homes, boats, etc.
But if we look at high-interest payday loans, college student loans and credit cards, we find rates that are far above the low rates paid by wealthy people. The benefits of low rates are limited to mortgages for certain classes of buyers and credit offered to the super-wealthy.
The rates paid by the working poor are essentially unchanged by the Fed's zero-interest rate policy (ZIRP): credit cards that charged 19% in 2008 are still 19%.
Meanwhile, zero rates have stripped savers of billions of dollars in interest they would have earned were rates normalized, i.e. within the historical range. Normalizing rates (i.e. pushing them up) would not change already-high credit card rates, but it would shift income to savers.
Zero-interest rates incentivize speculation, not investment. Look what corporations have done with cheap credit: they've used it to buy back shares, boosting the value of insiders' holdings and enriching the already-wealthy who own the majority of equities.
Higher rates would disincentivize enrich-the-rich speculation and shift income to savers. As for the false claim that low rates boost investing in new production: can anyone name one factory that was built solely because rates have been near-zero?
Meanwhile, a trillion dollars was borrowed and used to buy back shares in a speculative frenzy that didn't create a single job.
Another way to help Main Street is to lower the cost of commodities and goods by strengthening the U.S. dollar via raising rates. Strengthening the USD lowers the cost of imported commodities and goods; as the purchasing power of the USD rises, everyone's dollars go farther.
While the Fed cannot directly end regulatory capture (i.e. death of democracy) by corporations and the super-wealthy, it can end policies that have further enriched the top .01% who have used their wealth to purchase the regulatory and legislative machinery of the state.
And it can stop paying banks interest on reserves stashed in the Fed.
To help Main Street, the Fed must stop incentivizing speculation over investment and end policies that have shifted wealth and income to the top of the wealth pyramid. Main Street's woes are largely structural: the high cost of regulations, the soaring cost of healthcare insurance, the artificial-scarcity costs imposed by cartels enforced by the federal government and the pressures generated by globalization and automation.
The Fed can't solve those problems, but it can certainly stop enriching the already-super-wealthy at the expense of the rest of us.
It's Time!!
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QE for me?
Awesome!!!
TOO LITTLE - TOO LATE...
Spoctor Din
Firstly, ^^Dr. Spin's avatar be spinnin'^^
Now, Secondly, I want to quote Mr. Charles-Hugh(Dick in his Brain) Smith:
If the Fed continues to enrich the super-rich at the expense of the rest of us, there will be political consequences.
Now, Mr. Smith, tell me: do you or do you not consider the members of the Federal Reserve Bank, the holy policy makers and takers, the unauditable bank that audits banks, to be semi-rich, rich, or super-rich?
Oh, what? I sound factious and rude? Fuck you and, furthermore, I find it hard to establish credit in your writing on this subject if you honestly consider the policy makers involved to be held equal in comparison to the plebians (or, non-policy making individuals).
Bwahahaha, urp, urk, koff, koff
Actually, I teach spin to the musheads at the local liberal arts university...
...and musheads, they are...
Spoctor Din
Glass-Steagall repeal in 1999, look at how the chart reacts.
Other. People's. Money.
Charles: Hey, you guys are unfair for making it such that you the super-rich can become superer-rich.
FED: Fuck you.
Charles: Ouch! B-b-but, why?!
FED: Fuck You.
Charles: Oh, I see. How could I have not known that you all are super rich , I mean, very wealthy as well...
FED: ...Fuck You.
Charles: I guess that I could have directed my efforts a bit more heedingly.
FED: Fuck You; you are an unfit mother. The FED is fed-up with you and finds you irresponsible. We will take your Big-ASS-ETS and children because you are unfit. The FED---Fuck You.
Excuse my French but Chuck-o is fucking retarded. What a waste of time, this isn't worth the time reading. Maybe with some sweaty Brazilian chicks but now it's even too late for that.
This article badly needs a user with GIANT BREAST MOVING as an avatar in order to keep eyes on it.
The parasite killed the host.
He's dead Jim.
QE for you! And me. If they fire up the helicopter and drop money on my house, I will consider it restitution.
Hilarious...., they dont call this shitshow the new world order for nothing.
The only point at which the Fed will pay any attention to Main St is when they see a mob wielding torches and pitchforks out in front of the Eccles Bldg.
Insert picture from We Are The 99% Movement here.
Protests... Right.
Burn them out, tear apart those who escape the flames. Hold up a large sign for news cameras, "Just A Reminder from We The People".
LOL!, no, not at all. The Fed should in fact be audited and board members prosecuted for treason. All funds should be clawed back and every fucking banker involved in all the MBS and other bullshit paper games should have their fucking head put on a bloody pike.
There is no free lunch fuckers, never has been.
By the way, just because people are not listed in the "official labor force" , this does not mean that they are not involve in commerce as a producer or consumer (the real economy).
The harder the oligarchs squeeze main street, the more economic activity will go underground. Fuck em.
I am convinced that the underground economy is the only thing that has been keeping this shitahow afloat this long. Crashing commodities will have no affect on main street. With 2 dalloar nat gas I am still pay in 15 cents per kwhr for power. Why because the political class is already owned by the 0.001 percent. Same reason the printing won't end
I am convinced that the underground economy is the only thing that has been keeping this shitahow afloat this long. Crashing commodities will have no affect on main street. With 2 dalloar nat gas I am still pay in 15 cents per kwhr for power. Why because the political class is already owned by the 0.001 percent. Same reason the printing won't end
It was never, ever, even from its raw beginnings, the Fed's purpose to help Main Street. Its purpose is to lie-to and steal-from the actual creators of wealth. Labor + Raw materials = Real wealth.
Both Wall Street and Main Street are owned by the same people!
When they decide it will change.
Had the Fed wanted to help Main Street, their time for action was decades ago.
if the fed wants to help main street, they should offer 'interest(usury) free credit' on their currency that they create ex-nihilo.........
Fri, 01/08/2010 - 17:22 | 187555 trav7777Yes...consumers without income do not borrow. Banks do not lend to consumers without income.
Simple as that. Until/unless the Fed is going to lend to us at 0% and not expect to be repaid because we the little people do not have jobs, then consumer credit will continue to contract, impacting all the synthetic bullshit pyramided atop it.
What will occur is that the government will attempt to stand in for the consumer and borrow to maintain credit growth for as long as they can; this is the Keynesian stimulus answer. It's really not about "aggregate demand" per se, but about maintenance of the credit ponzi's need for continuous growth.
Hahahahaha! That's fucking funny. They'd sooner fund terrorists than aid serfs.
you got that right.
"If the Fed continues to enrich the super-rich at the expense of the rest of us, there will be political consequences."
What do you think HLS was created for? Protecting the zios from the masses.
...political consequences, HAHAHAHAHAHAHAHA!!!
What do we need more of?
A) "QE"
B) Windbags writing about "the fed"
The Fed has left main street with washing the dishes and getting their hats and coats, proud of the jobs they created for us.
All the Fed is going to do is trash the USD to mitigate any effects of other actions they may or may not take.
they already did it
they should. Service economy in general and finance are just multipliers of the manufacturing and construction real values. In the USA this idea is distorted by the ability to print debt to get consumable (that is just like manufacturing as long as sombody buys the debt).
yet I am afraid that manufacturing is the core of any economy...
but this is just my 0.02$ thinking...
:-)
PS
(anybody that believes that a strong dollar will help the economy, is going to have a big disappointment... because we will have a strong dollar and it will be the beginning of the end...)
"strong dollar"... LOL!!!
remember the velocity of a dead currency is in fact zero.
it is naive to think that the fed has a beneficent bone it it's scrawny hobbit body. ASK YOURSELF WHY AMERICANS PAY MORTGAGES WITH TWICE A HIGH AN INTEREST RATE AS GERMANS? WHY DOES MERKEL PAY NIRPLE WHILE UNCLE SAM GETS BONED FOR 2%+?
Triffin's paradox +Jevon's paradox = pandora's box opened by Pax Americana.
"Our way of life non negotiable in oligarchy's monopoly global rule." The Cheney tricky dick and oil slick mantra.
Now become dystopian bubble-o-nomics tearing apart Tarzan's natural jungle and making us all wear Zorro's mask of vengeance !
Is Charles losing his mind? And draculas, too, should stop drinking blood, volunteer at a local community center, and just give up the life of an undead parasite. That's what they should do.
A pretty damning perfect cross if you have ever seen one.
QE for the 99% next lol?
Don't bet on it.
The only way to 'save' main street is to end the fucking shitty CB system we have, and also hang the congressmen that keep pushing us into shitty trade deals that benifits the other party and a handful of bankers. In otherwords, main street has long been dead and we are just smelling its rotting corpse.
Maybe, as in Finland Uncle Sam can send a check for $1000 to each household every month. Might really create jobs on main street with "demand" for real goods and services, instead of demand for paper "assets" to artificially boost prices.
And might be cheaper in the long run!
won't help when the vast bulk of shit is made somewhere else
Even that would be done on a basis of "the chosen ones" and you and I ain't chosen.
Will never happen because it already happens every day in the form of EBT, Welfare, subsidies, and the like.
Everyone needs to stop readng at, "To help Main street..."
+1000 at the point of which my only thought .. Clueless
Well another one of the thousands of articles even insinuating that the Not so Federal reserve gives a flyin F%%k? Chuckie..Did you see that "market" Friday? Were you in a cave? We have an official declaration during the trading day that indeed,cough cough ISIS is on US soil and not even a waver. And all here know what a real market would have done. That display in itself tells you the Fed could care less at this point about perception, what you see of them. The utter audacity and hubruis displayed should have been obvious to a 3rd grader they dont care what you think.. I have to read one more idiot that gives me the meme that they , are stupid, makes mistakes , incompetant and ill loose my mind even more. Stop with that discussion and the interest rate discussion !!!!!!!!! Period. To even bring these up is only playing to hte crime . To even think they want to help main street rather than destroy it just tells me how disconnected from logic and reality this author is. What ever single American needs to do is stop thinking in the "what should" happen mode, insuating this is the days were June Cleaver has a smile on her face with the meat loaf baked and a blow job waiting for her hard working hubby. Gone. Loose that way of thinking. . You have evil rulers and the only way that will change is if some in the miltary wise up or the Yellens of the word genuinely feel the need to look under their cars everynight.
"Some take the bible
For what it's worth
When it says that the meek
Shall inherit the Earth
Well, I heard that some sheik
Has bought New Jersey last week
'N you suckers ain't gettin' nothin'"
--- Frank Zappa
Fuck you Janet, Ben and Alan! Don't want or need any help or what you are shoveling...just crash this shitshow now, so you too, will lose it all.
Why would they start now? Did a billionaire Jewish banker move to Main Street?
Gold going down as fast as it went up on Friday
FED is in control "Main Street" savers continue to be anally brutalized.
The Fed has always been thinking of main street. As food.
Main-Street is dead.
Just Fraud Street left standing between JpMorgan and Goldman Sachs.
Country is dead.
You only have like 4 - 5 cities left in the U.S.A. that are sitll doing OK thanks to heavy subsidization from the Fed (NYC is still sorta standing) and a few others.
Pretty much wherever there are a lot of BANK / Insurance company/ Brokerage offices the economy is still sorta alive...... because these corporations get heavy heavy gifts from the FED while the rest of the country burns.
http://2.bp.blogspot.com/_qFiyjwMlP0Y/StaFp0eOm1I/AAAAAAAABJE/5giA3TqEiq...
The FED loves to eat savers too.
We should replace this fiat system. With one controled by actually productive people like farmers,miners,builders and such. A coin with a fixed value that is measureable. An energy backed coin has some very sound logic working in its favor.
Any thoughts?
Andy, a gold standard or similar has never been a perfect way to tie value to something, but it is infinitely better than the massive and long-lived (and soon to implode) pyramid scheme/ponzi we have been increasingly exposed to over the last 102 years since the Fed was started. The best thing we can actually do is to be proactive and push for the Fed to be extensively audited--That is their biggest fear since the internet!
No hanging is their only fear budy. The idea of an audit is laughable.
The gold standard has been done and did not last. That is not what Im talking about. Dont confuse the two.
If it didn't last generally, then why are central banks the world's greatest holders of gold?
If you mean it didn't last publicly, then I agree.
A publicly (gov't) managed gold standard only ever lasts until it overly restrains their ability to conficate earnings.
Gold has been money for 6000 years.
It is a point of view as to whether the departures from it are triggered by monetary failures....or whether the act of departure from the gold standard is itself the failure.
The main issue with gold as the coin is savers screw it up. Sorry.
And what makes you think the CB have any gold in their vaults? If there were it would not be the CBs it would be someone elses gold.
Many of those 'savers' are the boomers who,contrary to popular opinion, saved and expected that interest. Then when old and feeble, unable to earn, the FED and government flips on them stealing that saved money as they are now forced to use the capital. Adding insult to injury, due to Con-gress's wheeling and dealing with the medical corporations, have made medical treatment and drugs needed so expensive that it not only wipes elderly savings, but takes their homes and any other asset they own to boot.
Many of the younger gens think they've been screwed,,, and blame boomers, but there's nothing like being old, watching a loved one dying for lack of medical help or hungry, and there's nothing you can do because the system stole their savings and for some even their SS retirement funds have been ceded to the medical barons.
The FED was designed to do exactly this,,, and 102 years of their history is proof,,, so expect little to no help from them or government. The only hope is an honest money run by an honest government. That my friends will never happen. Larceny is part of the human heart and no one has figured out how to control it for any length of time as the electorate always grows apathetic over time.
Short term fix,,, End the Fed. Default on the debt. Hang the damn bankers and traitorous pols and go from there.
It is fairly common knowledge that the majority of the Fed membership is held by private interests representing a myriad of private banks with a wide range of international interests. Because Fed decisions are put to the vote, we can confidently say that the decisions ultimately made by the Fed are of those in the majority, those who do the bidding of private interests.
With the passage of time it has become quite apparent that the Fed's agenda is to create and nurture asset bubbles and then, most importantly, determine when to burst them. The Fed is viewed favorably (in the public's eye) when, once a 'suitable' low has been reached, they will actively intervene in tremendous ways to stimulate markets that have been depressed by the preceding crash/bubble implosion. From this deduction we can see that the Fed is privy to the two most vital pieces of information when participating in any market: 'the high' and 'the low'. We are all familiar with the old mantra "sell when they're high; buy when they're low". It is a fact that speculative opportunity can only result from booms and busts, or at the very least on-going cycles of reasonable amplitude, and so chaos must be manufactured in order to realize rapid and large profits.
The Fed seems to use a myriad of tactics or 'tools' that it has at its disposal to influence the markets. At the moment we have witnessed a strange one at work: it is the 'threat' of action, action that hugely affects the markets, ie the 'threat' of raising rates, or the 'threat' of ending QE (or easy money) [e.g the 'taper-tantrum']. Janet Yellen (normally perceived as 'dovish') only needs to verbalize a 'hawkish' tone to effect a considerable market response!
The Fed's recent intensity of commentary and announcements is not some attempt at becoming more 'transparent' with the markets, (as they would have you believe), it merely presents them with more opportunities to sway the markets in one direction or another. Mario Draghi's recent surprise inflicted on the markets through being more hawkish in his actions than anticipated (whilst remaining largely dovish), created huge ructions in the markets, particularly where 'investors' had piled into short bets against the Euro. Therefore his tone before his official execution (which elicited a response by the affected markets) was different in the official execution (which subsequently prompted the opposite reaction by the markets)--this all provides a wonderful opportunity to speculate against the markets for 'the insiders'. Could we then say that his words before his actions (even though his actions left things mostly the same) were nothing short of propaganda?
The Fed and other central banks like the ECB are controlled by similar interests. Over the coming days leading up to the Fed's huge rate-decision meeting on the 15th/16th December, we need to watch Yellen very closely. She has been quite ‘hawkish’ of late, and if that 'hawkish' tone continues then I would say she will surprise the markets with a ‘dovish’ response, or a rate change below .25%. If on the other hand she suddenly becomes more ‘dovish’, then she is likely to surprise the markets with a rate rise of .25% or more. A third scenario is also highly likely: that is if she becomes strongly ‘hawkish’ in her statements, it could at this time precipitate a stock and/or bond market crash--in this case it would have been with her 'mere' words: the 'cause' without the 'proper effect' of an official, scheduled, rate announcement: This would have the benefit of her being able to suddenly become as 'dovish' as she sees fit, perhaps by leaving rates unchanged at the December meeting. Should this scenario happen, you would see that she caused a major market crash with no action affecting the current interest rates at all, ...just words.
Of course I have speculated quite a lot on what the Fed might do but how they have been swaying and playing with investors needs exposure and condemnation IMO.
Even Alan Greenspan, in 2008, was shocked, shocked, by the greedy and short-sighted behavior of the banks.
A zero nominal rate is a negative real rate*, so it comprises deflationary pressure. And then the Fed stands around with their thumb up their ass, wondering where the increased inflation (that they want), went. Somebody should arrest Bernanke for conspiracy to be an idiot.
*assuming inflation generally continues anyway, as it has.
That said, I generally agree with CHS here. Fed can't helicopter money to the masses and shouldn't helicopter money to the banksters. Treasury could helicopter money to the masses in several ways. Better to the masses than the banksters.
As to the Fed of course it should be audited, their books opened to the public, what other multi-trillion dollar entity is secret? (OMG I should never ask that on ZH!) They failed utterly in 2008, the whole mess can really be blamed on them, both short-term and long-term. Of course they should be "audited".
Replace the FED with something better. Come on. Stand up!
Auditing the Fed? lol. Who congress?
Ladies and Gentlemen, the theft always happens long before it is realized.
The opening of the vault, or your safe at home is not the theft itself. Realizing the theft is not the theft, but an act that must be done for life to continue.
There is no possible way for the Fed to help out main street. Its every fiction is to at best anesthetize a financial amputation performed by Fractional reserve banks, at worst it also performs the amputation itself.
The only way Mr Yellen can help you is to open his books and vaults so we can all acknowledge reality, fire the staff, and then resign.
I can tell you whats in their vaults. Nothing.
Short answer: Nope.