Steven Hansen's  Instablog

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untrusting investor Comments (9879)
 
Interesting article on the Fed to primary dealers money flow and relationship to equity prices in this article.

http://bit.ly/Hi0Iht

It seems that the conclusion is that only "inflation" can halt this process, which may well be correct.
7 Apr 2012, 05:29 PM Reply Like

The Hammer Comments (2992)
 
ui it appears the fed is getting less bang for the additional buck. as i have suspected alot of this growth is from money pumping and deficit spending not true private sector growth. the housing market is purely the most manipulated distorted market out there.
8 Apr 2012, 05:26 AM Reply Like

untrusting investor Comments (9879)
 
TH,
Would agree. Most of the "reported GDP" growth in the US is really inflation and probably mostly caused by the Fed easing and money printing (along with even more of the same by every other central bank in the world as well).

We did go and check on US GDP in inflation adjusted terms for another comment. If one remembers correctly, the US inflation adjusted GDP growth from about 2006 to 2011 was something like 0.7% annually on average. In other words almost no real growth on average for five plus years.

And given the massive amount of US government deficit spending ($1.5 trillion/year), plus the massive amount of Fed easing and money printing including ZIRP, QE's, OT, EU swaps, guarantees to TBTF's, etc. ... the amounts of dollars become truly staggering.

The actual increase in the Fed balance sheet from about $800 billion to over $3 trillion from QE's is just a small part of the picture of the Fed's impact. Some have estimated the ZIRP effect to be about $1/2-1 trillion annually of wealth transfer from savers, pension funds, etc to the bankers and market casino (which would be about $2-4 trillion of market gains to the gamblers and corporations). And some have estimated the Fed's guarantees on bank and bad debts to be over $10 trillion. Then we have the federal government annual deficits of about $1.5 trillion annually which would be another about $6 trillion over 4 years.

So it really does get to be staggering amounts of money over the last and current about 4 years. Say it's over $20 trillion in about 4 years. That is an average of about $5 trillion/year or 1/3 of the entire annual nominal GDP annually to achieve a paltry less than 1% annual real increase in GDP. Pretty expensive proposition. But it has made the wall street speculators, prop and HFT traders, corporate america and corporate executives a lot richer. So Banana Ben and the politicians are probably really happy with themselves.

Meanwhile in the real world, reports have shown that the inflation adjusted incomes of average working americans have declined something like -7% over the last four or five years.
8 Apr 2012, 12:30 PM Reply Like

untrusting investor Comments (9879)
 
Another great article by Ellen Brown.

http://bit.ly/IbrE4M

And it posits exactly the right question, why is the government not borrowing directly from central banks as opposed to private cartel banks and saving taxpayers significant interest costs? At least with central banks the interest cost effectively gets refunded to the government/taxpayers.
7 Apr 2012, 06:19 PM Reply Like

Steven Hansen Comments (2198)
 
My normal weekend article is up at Econintersect showing how your understanding of unemployment is being corrupted by the way the unemployment numbers are derived.
http://bit.ly/HjH8Bv
Also a great post by Elliott Morss explains why the US banking crisis is not over yet.
http://bit.ly/Ipb6py
I have just posted a review of consumer credit which shows it is still expanding faster than economic expansion.
http://bit.ly/HjH5Wg
we have posted an opinion piece from Rodger Mitchell who is attacking Obama for capitulating to the right.
http://bit.ly/Ipb7tB
and finally, my partner John Lounsbury has posted a controversial article on when multifamily residences.
http://bit.ly/HjH8BB
8 Apr 2012, 09:06 AM Reply Like