The spectacular stock market boom underway is fueled purely by the
Fed's massive money printing and has no connect to the real economy; the
average return on stocks at about 20% a year is pure redistribution of
wealth as it far exceeds the real return of the economy at about 0.8% a
year.
The dismal growth performance shows the deep inefficiencies of the Fed's
policies. A simple truth is growth and employment need real capital;
Fed's money printing and near-zero interest rates have not made real
capital more abundant. Will the fall in real per capita income be
reversed through more of the Fed's money creation? This is what is
promised by the Fed. Money creation is a panacea to all diseases and is
the path to economic prosperity, says the US Federal Reserve. So then
must be looting and counterfeiting.
A central banker can be as arrogant as they come and as obstinate as an
ass. The Fed will keep printing trillions of dollars and forcing
near-zero interest rates till the end of the world. The question of
"where is inflation?" will have the usual answer: there is none.
Undeclared inflation will encourage borrowers to step up their
borrowing. Borrowers are favored by near-zero interest rates, high true
inflation, and by defaulting as usual on monumental loans. It is a free
for all: grab as much as you can. As has become fully admitted, the Fed
will buy all failing loans. It is wealth redistribution via the Fed's
money printing.
Noureddine Krichene is an economist with a PhD from UCLA.
(Copyright 2013 Noureddine Krichene.)
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