Tuesday, April 2, 2013
FED IN CONTROL - HOORAY?
The Fed is in tight fisted control of the bond market and the stock market.
The Fed has put a convincing floor under the housing market.
The Fed - in collusion with the press - have fostered a pervasive conviction that the economy is healing - and that nothing really distressing could ever happen as They will always be there to bail out any large distressed institution (bank or insurance company) whose demise would be endanger the financial markets.
The only downside to this is that only those closest to the FED (Banks, insurance companies and the largest Corporations and Hedge Funds) can thrive.
Sure, there will be huge winners in the "information-technology" sectors. Sure, executives at the top of huge corporate structures will thrive. Sure, successful small businesses will pop up and then go under. And this all creates a patina of capitalist activity.
But 60 percent of the workforce is unemployed, underemployed or part of the working poor, and that number will continue to grow. Another 30 percent of the workforce is the working-like-hell just to pay their bills and keep up a middle class veneer. And those poor middle class families with kids are all sinking quickly into the lower middle class/working poor, as education and health care costs sap the lion's share of the family budget.
And the Fed itself is at the mercy of CREDIT CREATION - DEBT CREATION. The FED can and does create ever more fantastic sums of Credit./Debt. The Government is doing its part.
But 70 percent of our economy is dependent on CONSUMER CONSUMPTION.
CONSUMER CONSUMPTION IS ENTIRELY DEPENDENT ON CONSUMER DEBT.
The one thing the FED can not do is force consumers to borrow.
SO: How does the consumer keep piling up debt as their incomes and lifetstyles sink en masse?
Riddle me that, Batman.