Don’t Fight the Fed
By Johnny Roosh
…fire the Fed.
Yesterday we learned the American economy added more jobs than expected. While it was not enough to budge the 9.6% unemployment figure, it was a surprise to everyone…including the Federal Reserve who had just announced a $600 billion dollar initiative to create economic “stimulus” via buying back government debt. This essentially pushes more cash into the economy by printing more dollars, the theory being cheaper money will jump start lending and hiring.
But!
Interest rates are already at historic lows, banks aren’t lending, real estate continues to fall in value, companies aren’t significantly increasing hiring and consumers remain skittish.
And!
There is already more than a trillion dollars of liquidity in the system, on the sidelines – not being lent or spent – and yet the Fed ostensibly believes that what the economy needs now is more liquidity. The federal government has found many and several ineffective ways to mortgage our future in a futile attempt to create jobs and this is the one that we might regret the most dearly.
The Keynesians finally got their wish. The Federal Reserve plans to inject $600 billion of the most caustic debt imaginable into the economy. This is the Agent Orange of monetary policies that has the potential to wreak financial havoc.
In the hope of generating inflation, the central bank is going to enable deficit spending by buying treasury bonds. You read that correctly: the primary goal is to erode the value of the dollar, and we get to watch our currency and wealth literally dissolve before our eyes.Only a desperate government would consider debasing its own currency. The resulting inflation will be an insidious tax on every American who will suffer as wages lag behind increasing prices. It is doubtful that countries like China will react favorably to the precipitous drop in the value of the debt owed to them.
One has to wonder, had the Fed waited one more day until the employment numbers came out, if they would have paused their relentless attempts to “thwart deflation” and “create jobs” by further rendering the dollar worthless.
Once again, repeat after me: “The government can’t create jobs.”
That’s not to say they can’t hire citizens to park their flabby arses behind desks and vote for Democrats, but the government can’t create jobs in a pure sense – jobs that actually create net-net wealth and prosperity and in turn revenue for the government.
Consumers aren’t buying and employers aren’t hiring because conditions are uncertain. (yes, I bolded, italicized and underlined “uncertain”)
Conditions in turn are uncertain in no small part due to the fact that those that have the cash, banks, employers and consumers don’t know what the government’s next bumbling intervention will be as it relates most substantially to taxes and health care.
So they wait.
No amount of Fed Quantitative Queasing will change that. In fact most consumers and employers could give a rip what the Fed is doing.
Based on election results this week, one might conclude they would just as soon the government get the hell out of the business of manipulating the system.
So why does the Fed insist on more of the same?
1) Because they can’t not. It’s the nature of government the last few decades. They must justify their existence.
2) Furthermore, they must justify past actions; if flooding the economic landscape with liquidity didn’t work before, that must mean we just didn’t do enough.
3) It’s the only lever they have, given the bent of the current administration, who until this past Tuesday were opposed to any economic prescription other than increasing spending.
4) Irrational fears of deflation; the theory is that once prices fall, the consumer becomes even more fickle: Why buy now when the price will be lower tomorrow? So prices go lower still. The problem with this theory is that history shows otherwise and…consumers just aren’t savvy enough to wait until tomorrow.
Despite the misinformation propagated by these big-spending liberals, deflation has existed during extraordinary periods of economic growth and did not adversely affect consumers or wage earners. In fact, deflation is not only a common occurrence in a free economy, but it is also indicative of a vibrant and healthy economic expansion where the innovations and efficiency that competition engenders lower the costs of production. These lower costs translate into lower product prices benefiting the consumer.Consumers were not harmed by the significant deflation of personal computers prices over the last two decades, and despite these falling prices, there has been explosive growth and profits. No credible economist could argue that consumers, manufacturers, or the economy would have been better-served if the government intervened and forced computer prices higher. Yet Keynesians propose that our economic woes can be ended by forcing the price of all products higher.
Employers and consumers will not budge until the economy naturally, and in this case excruciatingly slowly, takes up the slack created by the collapse of the real estate bubble, which of course was created by another flavor of government meddling.
The employment numbers show this is starting to happen and that the chances of a double dip are diminishing. The numbers behind the numbers show that average hours worked by those that are employed are increasing as well, further demonstrating capitalism’s ability to overcome even the worst liberal economic molestations.
There is no amount of Federal intervention that can or will change the fact that it is the small business owner, the employer, the risk taker; the capitalist, that can take up the slack. It is the newly-minted GOP’s job to make sure this can continue unabated while at the same time recalibrate America’s fundamental expectations of the Fed’s ability to effectively manage the trajectory of the overall economy.
For if the Fed continues to dabble in economic alchemy, it only increases the likelihood of inviting the as yet unrealized but certainly dire consequences of a nuclear currency war in an ever more global economy.
November 6th, 2010 at 3:02 pm
Supposedly the fed wants inflation @ 5%.
Imagine a world where housing values and wages are decreasing at 10%/year while the cost of everything else increases at 10% year. Bingo! 5% target attained! How could consumers and businesses ever object to this?
November 6th, 2010 at 3:10 pm
Yes the Great Bernanke never saw and inflation he didn’t like. He jaded monitorist philosophy is criptic Keynsian. If he had not himself to quote in his books he would have no sitations at all. His academic rants contain no perspective of history or the politcal events surrouning him and his writings. I refer to his book on essays about the Great Depression. Glen Beck should fit this guy in a costume and sit him on “Spooky Dudes” shoulder.
November 6th, 2010 at 3:57 pm
One of the more advanced lessons that the Army teaches leaders is that sometimes the best course of action is to do nothing. If you don’t have the power to solve a problem, then constantly tinkering with ineffective solutions not only wastes everyone’s time, but it reduces confidence in your ability to lead. The Fed (and most of the Obama administration) have yet to learn this lesson.
By the way, nice to see you writing again, JR.
November 7th, 2010 at 12:08 am
And this way, all of those people with CDs and savings accounts can earn even less on what little money they have left. And why is it again that the federal government is bound and determined to get more people taking out loans and mortgages?
November 7th, 2010 at 10:06 am
You teabag kooks are as wacky on economics as on the harder sciences.
“Deflation! Global warming! Yay!”
Stick to things you know about. Guns, gay-baiting, building poison-gas shelters to defend you from Saddam’s missiles…
November 7th, 2010 at 11:59 am
. . . winning elections at the federal, state, and local level . . .
November 7th, 2010 at 2:48 pm
Welcome back, Roosh!
I assume the Fed’s recent actions frankly echo Obama’s stated objective with going to India – expanding exports. A weaker dollar makes American goods cheaper, which we just saw this past September helped reduce the trade deficit:
http://www.bloomberg.com/news/2010-11-07/trade-deficit-probably-shrank-in-september-as-lower-dollar-helped-exports.html
That said, spot on with the rest of the analysis. The trillions on the sidelines are waiting for a good reason to get in the game – and at least gridlock in Washington might begin to provide some of the conditions necessary to make that happen.
November 7th, 2010 at 3:23 pm
And once again the Clown shows what a truly ignorant douchebag he is. Bravo, Clownie.
November 7th, 2010 at 5:38 pm
AC, even you have to realize that printing money isn’t going to get us out of this hole. The price of everything we import is going to skyrocket.
Yes it will help with the trade deficit but, mostly just because we won’t be able to buy as much.
November 7th, 2010 at 7:41 pm
AC, after getting your ass kicked at the polls, it’s proper etiquette, when crawling out from the rock you live under, to gently rinse after consuming a hearty meal of shit tacos…or is that the residue from last night’s trade at the salad bar?
No matter….in either case, the blow-by from your pie hole is quite fetid; please disinfect ASAP.
November 7th, 2010 at 7:47 pm
AC & AC Jr. look somewhat dejected in their after election portrait…
http://tinypic.com/r/97o08n/7
November 7th, 2010 at 8:36 pm
You far-right kooks cheering the Republicans taking over a house of Congress are ya? Yawn. Angryclown has little doubt you wingbaggers will keep braying about “Takin’ back our country (to the carefree days of Jim Crow)” regardless whether it’s Nancy Pelosi or John Boner sitting behind President Barack Hussein Obama at the State of the Union.
November 7th, 2010 at 11:14 pm
No Clown, it’s not “takin’ back our country”. It’s the genius of constitutional democratic balance that stops perverse people like you from turning your fellow citizens into slaves.
You might want to review the Federalist Papers and educate yourself on exactly what this country you live in is based on.
November 8th, 2010 at 4:13 am
After the 2008 elections the Clown said that the “smart people are in charge”.
Ha!
Ha Ha!
Ha ha ha!
I’m crying here!
Hoo! That’s a good one.
Obama smart? Well, I guess if he has a question he can always ask Biden.
Ha ha ha.
November 8th, 2010 at 9:12 am
When you can’t win the argument, call them racists. Is that in Alinsky’s playbook or is that some spray paint grafitti you happened to read at home under the bridge?
November 8th, 2010 at 10:01 am
I had the impression the Angry Clown made his living doing something in the stock market. He might know something about finances. Let’s ask.
AC – a stock broker’s commission is a percentage, right? So you would take home more dollar bills if it cost the mark more dollars to buy the same number of shares of stock, right?
But would your increased earnings enable you to purchase more exploding cigars? Wouldn’t their price go up with everything else because of the very same inflation?
It already takes a nickel to buy Bazooka Joes that I once bought for a penny. How much higher do we need to push that price to achieve prosperity?
November 8th, 2010 at 10:57 am
angryclown paraphrased:
“I like to call you names, you don’t know teh science, and you’re all racists.”
That’s some argument. *snicker*
November 8th, 2010 at 12:10 pm
There was a blurb on MSN.com or maybe it was Yahoo! on Saturday morning, stating that Ron Paul would now have an ally in the form of his son, in his bid to abolish the Fed. I know that the Libertarians have long cursed its’ very existence, but is that a possibility?
If one believes underground rumors (or conspiracy theories), the main reason that JFK was assassinated was his desire to abolish it. In fact, a bill to do just that, was supposedly awaiting his signature on his desk in D.C. I can’t find anywhere where he made any speeches touting it and I was only about 8 years old at the time, so I obviously wasn’t attuned to politics then.
November 8th, 2010 at 2:28 pm
angryclown Says:”………. regardless whether it’s Nancy Pelosi or John Boner sitting behind President Barack Hussein Obama at the State of the Union.”
I’m more than elated that it won’t be Ole Nasty Nan sitting behing Barry!!!!