Ben's in a Bind

If you were Ben Bernanke and wanted to prove to the world that the policy of QE was working you would show this slide. This tracks the change in the Fed balance sheet and the S&P.




What’s not to like about this? The total US stock market capitalization is up north of $4 trillion in the past few years. A lot of folks got rich in the process. Millions of 401k are fatter too. But it is also true that the vast majority of American’s did not see much from this. Once again, the bulk of the $4T is in the top 10%. The fellow who sent this to me said, “laying the S&P over the Fed Balance Sheet growth kind of turns one’s stomach”. That’s my reaction as well.

As much as he may like to, Bernanke can’t show this graph. It will blow up in his face. He can’t show a positive correlation of QE to higher stocks. If he does, somebody is going to show the next two charts.

The first tracks the growth in the Fed Balance Sheet and the CRB. This lines up even better than the stock chart. One look at this and you have to conclude that QE = Inflation. 





The state of housing is still the central issue today. It is much more relevant to the health of the economy than high PE multiples. How did QE do for this segment of the economy? Can you say "lousy"?


 

Case Shiller 20 City Home Price Index Seasonally Adjusted


For the vast majority of American’s QE has been a dismal failure. Stock gains for the average guy were offset by losses in real estate. There was no wealth affect there. For those with few stocks and a house it was anther two-year loss in most cases. All savers lost as interest rates were kept artificially low. At the same time the cost of everything (except that IPad) is going up.

Sure the top 5% “fat-cats” got, well, fatter. I’ve always thought that the “trickle down” theory was, well, bullshit.