FROM JOHN HUSSMAN:

"the composition detail in the household survey was hardly an indication of a robust economy, with a loss of 240,000 full-time jobs offset by a 360,000 gain in employees reporting that they usually work part-time. Fully 352,000 of this increase fell into the category of “part time for economic reasons (slack work or business conditions).” 

 

When we analyze the financial crisis and subsequent recovery, the key events are actually very clear. In March 2009, the Financial Accounting Standards Board bowed to political pressure and removed “mark-to-market” accounting requirements, loosening U.S. accounting rules to allow banks “substantial discretion” in how they valued the distressed assets on their books, and making it possible for them to avoid insolvency even if they were in fact insolvent. 

Since then, banks have largely refused to restructure mortgages and other loans, and the Federal Reserve’s zero-interest rate policies have allowed banks to gradually recapitalize themselves on the backs of savers earning zero-interest and homeowners locked into higher-interest mortgages. Many of these banks should instead have been restructured, at no loss to depositors, and with bank bondholders bearing the cost. 

The Fed did not save the economy. Rather, the Financial Accounting Standards Board rescued the banks by making their accounting more opaque.

The Fed’s policies then shifted the costs of financial recklessness onto those who are not financially reckless – particularly ordinary savers and the elderly on fixed incomes, while the economy has more or less floundered.