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More Dope For The Lance Armstrong Economy

Feb. 03, 2019 5:35 PM ET44 Comments


  • Monetary policy anesthetized fiscal policy over the past decade.
  • The economy is not as strong as financial market performance suggests.
  • Financial markets are now dependent on monetary stimulus as fiscal policy is impotent.
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I’ve been critical of the Federal Reserve for several reasons over the past five years, but one reason stands above them all. At the depths of the Great Recession, the Fed administered the equivalent of shock therapy to the heart of the economy and financial markets with its crisis-level policies to halt the deflationary spiral in asset prices, stimulate demand for goods and services and restore consumer confidence. It worked, and it was a brilliant move! The problem was it never ended.

As a result, it lulled our policy makers on both sides of the aisle to sleep with year after year of financial wealth creation. After the recovery became a new expansion, fiscal policy never grabbed the baton that monetary policy was handing it by addressing the structural reforms our economy so desperately needs. Instead, monetary stimulus was injected every time there was any hint of economic weakness.

The Lance Armstrong Economy

I called this the Lance Armstrong economy back in 2017, when I wrote:

“This economy reminds me of Lance Armstrong when he was in his prime. In other words, accelerating at a rate of speed far greater than it should be under ordinary circumstances. Our deficit-financed growth is Armstrong’s steroid-induced speed on a bicycle. Neither lasts forever, and both have negative long-term consequences.”

Yet policymakers in Congress and at the Fed don’t see the long-term consequences, and if they do they refuse to acknowledge them. For example, we supposedly have the strongest and fastest growing economy in the world today, but is it really growing at all?

Let us assume that the Fed is accurate in its forecast for U.S. economic growth of 2.4% in real terms for 2019, which would be 4.4% in nominal terms when adding the expected rate of inflation of 2%. The Congressional Budget Office is

This article was written by

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Lawrence is the publisher of The Portfolio Architect. He has more than 25 years of experience managing portfolios for individual investors. He began his career as a Financial Consultant in 1993 with Merrill Lynch and worked in the same capacity for several other Wall Street firms before realizing his long-term goal of complete independence when he founded Fuller Asset Management. He graduated from the University of North Carolina at Chapel Hill with a B.A. in Political Science in 1992.

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