During today's little CNBC circlejerk shindig, Ben Bernanke, in defense of his disastrous, and now deadly policies, once again confirmed that the (one and only) benefit from QE2 has been to boost stock prices. Oddly enough, there was no mention of surging energy, food and commodity prices. Nor did Liesman ask the Chairman about 43.2 million Americans on foodstamps, just as he did not ask the dictator of the centralized ponzi for his comments on why at last count 50 people in Tunisia were dead protesting, among other, record food prices and cost of living.
From Market Watch:
Federal Reserve Board Chairman Ben Bernanke said Thursday that a controversial $600 billion bond buying plan has contributed to a stronger stock market. "Our policies have contributed to a stronger stock market just as they did in March 2009 when we did the first iteration of this program," Bernanke said at a Federal Deposit Insurance Corp. forum on small businesses. "A stronger economy helps small businesses more than larger businesses. Interest rates are higher but that's mostly because the news is better. It has responded to a stronger economy and better expectations." The $600 billion bond buying plan follows a completed effort to buy $1.75 trillion in government bonds and Fannie Mae and Freddie Mac-backed mortgage securities.
Obviously, none of this is news to anyone who realizes, as Zero Hedge readers have been told since 2009, that the Fed's one and only goal is to push stock prices higher in some fallacious linkage that the stock market is equivalent to the economy. But that's what happens when the person running the formerly free world is an academic historian with absolutely no real world experience.
And just to confirm this observation, we present Trim Tabs latest press release which states that the "Fed’s Quantitative Easing Works Wonders on Stock Market but Does Little for Economic Growth and Employment." Unfortunately it does a whole lot to make people all around the world cold, hungry, and increasingly angry and in increasingly more cases, dead:
Fed’s Quantitative Easing Works Wonders on Stock Market but Does Little for Economic Growth and Employment, According to TrimTabs Investment Research.
Economy Will Grow Slowly Until Structural Economic Problems Are Solved, and Market Participants Should Expect More Quantitative Easing in Second Half of 2011.
Sausalito, CA – January 13, 2011 – The Federal Reserve’s quantitative easing programs have helped stock market participants, financial institutions, and large companies but have done little to address the structural problems of the economy, according to TrimTabs Investment Research.
“Quantitative easing is supposed to produce stronger economic growth and lower unemployment,” said Madeline Schnapp, Director of Macroeconomic Research at TrimTabs. “While QE1 and QE2 have worked wonders on the stock market, their impact on GDP and jobs has been anemic at best.”
In a research note TrimTabs details the negative impact of the economy’s structural problems, including a depressed housing market, enormous state and local government budget shortfalls, higher energy prices, consumers who have muchless to spend than in 2008, and huge federal budget deficits that leave theU.S. vulnerable to the generosity of foreign investors. As a result, the economy has been stuck in slow growth mode despite QE1 and QE2.
“GDP increased a modest 2.7% in the third quarter of last year,” noted Schnapp. “We need GDP growth of 3.0% to 3.5% to significantly reduce unemployment. In addition, employment gains averaged only 94,000 monthly in2010, much less than the 150,000 per month needed to absorb population growth, and consumers collectively have $1.1 trillion less to spend annually than in 2008.”
TrimTabs also highlights a correlation between quantitative easing and equities. Under QE1 the Fed bought nearly $2 trillion in mortgage-backed securities, Treasuries, and agency debt between March 2009 and March 2010, a period in which the S&P 500 soared 67%. Stock prices then sank 13% in the following five months, and now they are up 20% since Fed Chairman Bernanke announced QE2 at the end of August 2010.
“When QE2 ends in June, the economy is in danger of returning to slow growth mode unless its structural problems are addressed,” predicted Schnapp. “We expect the Fed to engage in more quantitative easing until investors are no longer willing to loan money to Uncle Sam at low rates.
h/t Eric and Mark Mansfield