Financial Markets and the Fed

print
It would be hard to purposely wreak the level of harm on the United States as has Federal Reserve. I seem to be alone in recognizing monetary policy as a political agenda. It didn’t start with the financial crisis. The financial crisis was caused by the relentless goosing of asset values for years prior to 2008. Ostensibly Federal Reserve policy is a tireless effort to improve the financial wellbeing of all citizens. It is troubling that all but a few believe that. Now the president is trying to pass the stimulus baton to the arena of fiscal policy. Who would have guessed?

So, QE is finished and everyone is waiting for a reckoning. The reckoning may come. I have written many times that the reckoning will occur for sure when the country, government and economy are destroyed. The reckoning could also occur if the political scene turns against the Fed and there is a general understanding that stimulus is theft. There is not much chance of that happening.

There is not a doubt in my mind that the stock market is ready to drop big time. I have even taken some small bearish positions, bearish ETFs. I am still at least 90% cash. I am also certain that if it does start to tank, all of the central banks in the world will stop at nothing to crank it back up.

Lets suppose a serious decline begins. What is responsible for any good economic numbers? It is the unending asset enhancement initiative. If asset prices start to drop without permission form the folks at the top, a national emergency will be announced. The Federal Reserve will accept the responsibility of buying stock outright with both hands to “save the world.” Congress may also authorize them to do so. Will Americans believe it is a right and necessary policy? All of them who are long stock in their IRAs and through their pension funds will buy into it automatically.

So, just because it is time to unwind QE all around the world, don’t thing the various governments around the world will stop tampering with the financial markets. Do they have any tools left? They can come up with new ones.

About Fantasy Free Economics

James Quillian is an independent scholar and economist.

This entry was posted in Daily Comments. Bookmark the permalink.