Sunday, March 01, 2015

The Massive Divergence
Between Wall Street & Main Street
"All of the massive liquidity—-which took the Fed’s balance sheet from $900 billion to $2.5 trillion in less than a year—–worked it magic in the canyons of Wall Street, not in the household and business sectors of the main street economy .. The 5X gain in the Fed’s balance sheet .. has not been harmless——even though it has not stimulated the main street economy. What is has done, obviously, is reflate a massive financial bubble. The latter will splatter eventually, sending the main street economy into a new tailspin of short-term labor and inventory liquidation and another financial crisis for no reason whatsoever .. Do not these clueless Keynesian apparatchiks recognize that the money market rate and the yield curve are the most important prices in all of capitalism, and that their policy of massive and continuous financial repression generates blatantly false prices in the financial markets and therefore rampant speculation and asset price inflation? .. Needless to say, another quarter of no 'escape velocity' on main street and a further round of Kool Aid drinker speculation on Wall Street takes us just that much closer to the brink. Yet the Fed remains oblivious and continues to manufacture excuses and equivocations as to why ZIRP should extend into its 80th month and beyond .. This is mis-governance on a colossal scale. So when the next thundering crash occurs—-it is devoutly to be hoped that 'audit the Fed' turns out to be the least of the threats descending on the Eccles Building."
- David Stockman*
link here to the article

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