Thursday, August 27, 2015

ZIRPageddon.

At the end of the day, ZIRP is really not even a monetary policy. In fact, it constitutes a giant, capricious transfer of income and wealth by an agency of the state
to borrowers and gamblers at the expense of savers and producers
.

Indeed, not a net dime of the massive $3.5 trillion of new liabilities created on the Fed’s balance sheet during that period ever escaped the canyons of Wall [Street].

* * * *

The truth is, the Fed’s endless blathering about its 2% inflation target is a colossal hoax. In the first place there is no evidence whatsoever that real output and wealth increase faster at 2.0% inflation than they do at 1.0%—-or at any inflation rate at all. In fact [notwithstanding?], the Fed’s claim that it is still well shy of achieving its inflation target is the overriding reason why it keeps shoving zero cost credit into the money market.

[Big snip discussing BLS fictitious construct called Owner’s Equivalent Rent (OER) to represent housing costs and showing that if "honest commercial data" are factored into the standard BLS "medicated" consumer price index a different inflation rate is evident.]

In short, it’s kind of hard to say that 45% inflation in 15 years is not enough. Yet the official CPI adjusted for an accurate housing inflation rate computes to 2.5% per annum.

* * * *

In truth, all of the Fed’s gumming about the so-called inflation shortfall is just ritual incantation. The real reason it doesn’t raise rates is that it fears that the first rate increase in nearly a decade will trigger a Wall Street hissy fit.
"Can Kickers United—–Why It’s Getting Downright Hazardous Out There." By David Stockman, 8/25/15.

Photo credits: The Smarter Wallet; Inbound Sales Network; Ghana Witch Doctor.

4 comments:

  1. As I recall, the FED was supposed to attempt to keep inflation at ZERO PERCENT. The idea that 2% inflation is somehow acceptable doesn't make sense to anyone who can think past being 10 and living past 25.

    Adding an "employment" mandate to the fed was just asinine. The two *are* related, but not within the purview of the FED.

    The amount of greed and pompous disregard for untold millions that was demonstrated off the Atlantic Coast in 1916 is absolutely mind-boggling.

    And, a note to current bloggers: we baby-boomers weren't born yet.

    Tim Turner

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  2. Oh! One more thing.

    If you're gonna include leveraged debt in the Consumer Price Index, all bets are off.

    That's not growth. That's government-allowed fiscal manipulation. Essentially, the government hides its "going to hell in a handbasket spending" by saying, "Look at the wealth created!"

    Dollars aren't wealth. . . particularly dollars minted and thrown into stock market buybacks and temporary funding of unsustainable welfare programs.

    Wealth is the creation of new goods and services that are grown, mined, invented or manufactured by people.

    Golly! Which nation seems to have turned its back on growing, mining, inventing and manufacturing ANYTHING?

    Which administration seems to turn all its energies to redistribution of (shrinking) wealth to Wall Street and freeloaders rather than growing, mining, inventing or manufacturing?

    Which party demonizes any sort of growth at all?


    Tim Turner
    Gee, I wonder how this will end.

    ReplyDelete
  3. A side note: Where is that guy who had the Greek letters in his name? I'm probably too trusting or something, but he sure seemed to know what he was talking about.

    I'm left with reading Karl Denninger's Market Ticker. That's not a bad thing, but I miss the guy with the Greek name.

    Tim Turner

    ReplyDelete
  4. I had it in my mind that the original purpose of the Fed was to prevent inflation and booms and busts. However, I looked at the original Act yesterday and it mentioned only the purpose of the Act was to enable a "flexible currency." I thought the same thing about who the heck decided that X% inflation was an acceptable target. As Stockman said, nothing exists to show that any amount of inflation has any relation to economic growth.

    Charles Hugh Smith talks a lot about financialization of the economy. Probably not the only one. Getting rich off of fees and debt transactions seems to have been the premier method of the last decade (or so) and that has little bearing on the basic wealth-generating activities you list.

    I've never been anyone to begrudge any rich person his money but this enriching of the top 0.1% is not good. I don't believe in expropriation but think we ought to focus big time on preventing such a small percentage of people from amassing such enormous wealth from frivolous activities. I'm a liberty-loving guy but I recognize there are limits to liberty. Fraud and unfair competition statutes are good. So are anti-trust and securities laws. It's a shame that the former aren't used to break up the media monopoly where six people or entities control all the media in the country. No one can say that's healthy but, like the qualifications for president, no one seems too concerned about this.

    I can't think of whom you mean with the Greek letters, unless you mean Leonidas who posts here. He's not as regular as before.

    Market Ticker is good. I really enjoy the comments at Zero Hedge. As much reality as you'll find anywhere.

    ReplyDelete

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