Daily Archives: September 3, 2016

The Fed Under Fire

This time for not raising rates.

We’re at “full employment” except the Wall Street Journal seems to disagree with that, citing an “army” of unemployed men, and this isn’t comforting either:

That was largely because the biggest jobs gains came in bars and restaurants, which added 34,000 positions. Social assistance grew by 22,000, professional and business services added 22,000 and Wall Street-related positions grew by 15,000. Health care also contributed 14,000.

Nor is thisNor this.  The American “economy” is increasingly the “service” and government sectors.  Bureaucrats and the waitresses that serve them lunch.  Ugh.

What does “economist” Ed Yardeni have to say about it all?

“Apparently, it hasn’t dawned on Fed officials that their ultra-easy monetary policies might have contributed greatly to the forces of global economic stagnation and deflation,” says Yardeni.

Yardeni is right, but probably not for the right reasons.  There’s a reason the Fed isn’t raising rates:  it will destroy the balance sheets of the world’s creditors.  The Fed is not particularly concerned about its nominal mission of full employment and low inflation; it is trapped into keeping rates low because the “assets” of lenders – that is, the market value of what they are “owed” by borrowers – declines when prevailing lending interest rates rise.  First and foremost, the Fed has to preserve the institution of lending.

We’ve been over this.  In 2013More than onceIn 2014And in 2015.  We’re not unsympathetic to the Fed’s plight, but we have no solution for them other than the one we have already offered.

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