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Low Interest Rates Mask the Effects of Job-Killing Policies
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  • Nevis07

    And yet asset price inflation does affect greatly the cost of living. Note for example how the cost of renting has consistently increased at a rate above CPI or PCE indexes. Rent accounts for the largest portion of many’s (especially the poor’s) income. So create an asset bubble and you continue to end up with more and more people unable to afford even the basic necessities. QE might have been necessary in the immediate crisis, but it has been disastrous for the common American.

  • Andrew Allison

    US “household wealth” which includes stocks and bond, which are held by a minority, are a chimera. If, as is the case, real wages have not increased, how in heck can household wealth increase for people who don’t own a home or stocks?

    • FriendlyGoat

      It doesn’t.

    • Boritz

      One mechanism is that money in the form of taxes is taken from homeowners/stockholders and redistributed as EIC to those who don’t own those things. Of course that isn’t an increase if only a baseline is being maintained.

    • f1b0nacc1

      This is the problem with crony capitalism, a specialty of the current administration. President Goldman Sachs has delivered to his constituents, but as for the rest of us….well…
      As a VERY minor point, almost anyone with a 401k does own some bonds and stocks, and those do count in the statistical measures of household wealth. This does NOTHING to undercut your broader point however…

      • Andrew Allison

        You’re right, of course, about 401(k)s and pensions in general, but what’s the present value of all that “wealth” (off 10% YTD). A minor point of disagreement: the asset inflation we see, especially in the stock market is, IMNHO, due to the Fed’s demonstrably ineffectual zero interest rate policy, which has caused a flight to risk. No argument about the evils of crony capitalism, but I fear that it’s embedded in our money-driven political system.

        • f1b0nacc1

          Your observation about the Fed is well taken, though remember that the administration has been EXTREMELY cozy with Yellen (an appallingly bad Fed Chariman, even by the rather low standards of that job), and has been repeatedly accused of improper influence.
          By the broader observation you make still stands, and that is what matters here…

  • Pete

    If you weren’t in the stock market, your wealth didn’t soar.

    • FriendlyGoat

      And, as we know, people who don;t have money to get in the stock market—-guess what—-don’t get in.

  • qet

    The WSJ data is already obsolete. How much of that “asset value” has been lost in the past few weeks as the stock markets have nosedived? Maybe they’ll re-inflate, who knows? The point is that these “measures” of wealth are, today, suspect, to say the least.

  • Anthony

    Tone of piece brings to mind a few questions: do outputs of the political system primarily benefit those who own the wealth of the nation and do so at the expense of the working populace? does government nurture private capital accumulation through a process of deficit spending, Fed policies, and other sundry ways? and how can public action mitigate (limit/reverse) class bias in federal policies?

    • Fat_Man

      Abandon Hope All Ye Who Enter.

  • Jacksonian_Libertarian

    “In other words, while the Federal Reserve’s quantitative easing has not led to the consumer price inflation that many feared, it has led to asset price inflation.”

    The lack of understanding demonstrated by this sentence, is deplorable. The question it should generate is “Why has the printing of $1+ Trillion per year and 0% fed funds rate NOT led to massive real or consumer inflation?”. And the answer is simple, America and much of the world are 7 years into deflationary “Great Depression 2.0”. Only when you accept that we are in a deflationary depression does the state of the economy make any sense: Massive unemployment, historically low interest rates, no inflation despite $1+ Trillion per year in base money supply, falling wages, etc… If the $1+ Trillion per year printing wasn’t masking the deflation, the economy would be in freefall, just as it was in “Great Depression 1.0”.

    In the referenced article networth has increased $695 Billion, well of course it has that’s where all this $1+ Trillion per year in new base money supply is going. It certainly isn’t being used to expand the M3 money supply because there isn’t any growth or inflation which you would get with an expansion of the M3 money supply.

    (The previous explanation assumes the reader’s understanding of the Fractionated Banking System, and how the money supply is expanded by loans with the only limitation being bank reserve requirements. It also assumes the reader’s understanding that there is only ONE economic law, that of “Supply and Demand”, and currencies are subject to it just as everything else.)

    So the question becomes, how do we get the M3 money supply and hence the economy growing again? I think a “Shock and Awe” solution of the Fed paying off all foreign held US Treasuries about $6+ Trillion, and using those Treasuries plus the $2+ Trillion already held by the Fed to create Individual and Inheritable Social Security accounts would do the trick and kill 2 birds with 1 stone. Putting $6 Trillion outside the US and onto the world market would significantly devalue the Dollar. Thus making US exports cheap and imports expensive. This would reverse 4 decades of trade deficits overnight, and lead to US exporters grabbing huge portions of the world market share. This in turn would cause growth across the entire economy, and the loans necessary to fund this expansion would cause the M3 money supply to start growing again.

  • lafrom

    It’s time to leave the Democratic Party, because what you are calling for will never happen with the current Democratic Party. And the Republican Party needs an influx of reasonable and thinking people such as yourself who want to solve problems.

  • FriendlyGoat

    The first sentence of the last paragraph is a GEM. It explains why we DO NOT need to keep lowering the high-end taxes in order to “create jobs”.


    We DO NOT need to lower taxation for so-called “capital formation”, contrary to what is always claimed by the political right as a knee-jerk. The “dearth of attractive opportunities to invest that capital in ways that will stimulate employment” is THE PROBLEM.

    So STOP throwing more tax-cut money into the trillions of dollars ALREADY sitting in idle piles looking for “attractive opportunities”. And STOP saying that if we could just throw a few million people out of their current jobs funded by various government programs that THEN there would somehow be more jobs. The entire stated GOP prescription is upside down and backwards and HAS BEEN for decades.

    • circleglider

      Because the solution is to give more money to the altruistic geniuses running our government and who got us into this mess!

      • Tom

        Well yes. Because capitalists are evil and bad, and the government would take care of everyone if only it had more money. (sarcasm)

      • FriendlyGoat

        The solution is to tax the high-end silly when it does not hire and raise people, and only give it the tax break of deductions for the money it actually spends on people and growth. The specter of high taxes is not just for getting people to actually pay high taxes. It is for forcing companies and their owners to share downward with employees, suppliers and customers——INSTEAD OF paying otherwise-onerous taxes. We have simply forgotten how well this used to work when we actually had high taxes—-and actually had a rising middle class.

        • circleglider

          Money taxed from the evil “high-end” doesn’t just evaporate. It goes into the hands of government officials, who, by definition, always spend it first on themselves.

          Your malignant craving to pummel those more successful than yourself would be more honestly expressed if you simply called for their crucifixion. You could also support Donald Trump.

          • FriendlyGoat

            I explained what I am talking about very clearly in two posts here. I’m sorry you’re too dumb to get it.

          • teapartydoc

            You are calling them dumb. Look in the mirror, friend. You will see a cretinous anus.

          • FriendlyGoat

            If you’re tea party, no need to call me “friend”. The statement, you personally and your whole “party” is disingenuous.

  • circleglider

    Read about it from the perspective of one of us who trades these markets for a living:

    When the Fed embarked on its mission to rescue the economy in 2009 it did so on the following premise: Save the banks by re-inflating the housing and stock markets via easy money and, as a result, companies would hire and the eventual scarcity of labor would produce wage growth with the end result that the resulting inflation would permit for a tightening cycle to normalize rates.The problem: After 7 years and trillions of dollars in debt and balance sheet expansion there is no inflation nor is there any wage growth. And the reason for this is a structural one that central banks have been refusing to acknowledge and admit: The massive underlying shift in technology that is radically changing the global labor market. Not for the better, but for the worse.And this shift has enormous implications for investors, the economy, society at large and the stock market. And these implications have the potential to signal Game Over for this bull market.For years investing was easy. You just threw money at a market that never stopped going up. And when it occasionally fell, it was because the Federal Reserve had just ended a QE program. But not to worry, the next one was just around the corner. And sure enough every Federal Reserve press release or press conference produced an orgasmic buying feast every time the word “accommodative” was mentioned. Easy money, we have your back, the Bernanke put. You know the gig. Then we had the taper tantrum when Ben Bernanke merely mentioned the possibility of QE ending. Oh, but not to worry, we will stay at ZIRP. Free money for a long time to come and don’t worry we will let you know way in advance when we will raise rates. And even better: QE will be everywhere. In Japan, in Europe. And if things were to get really bad (i.e. the Ebola scare) we will bring QE4 back (Bullard, October 2014). But not to worry any issues are just transitory. Inflation is just around the corner don’t you know?

  • teapartydoc

    Any increase in household wealth is as artificially bubblicious as everything else in Obama’s economy.

  • lukelea

    “To grow the economy, cheap interest rates are not going to work as well as reforms that make business formation and job creation more attractive.”

    Taxing imports from low-wage countries like China, as Trump advocates, would do just that by stimulating demand for labor-intensive goods made in America. There is really very little doubt that this would be the effect. It would also increase wages across the board by increasing the general demand for labor. Those wages would be spent, thus further stimulating the demand for, and the production of, consumer goods.

    Are there any other equally sure economic alternatives?

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