The Next Stimulus

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First, what is stimulus? Stimulus is a way rich folks with plenty of political power  protect and add to the value the value of their assets. Stimulus also prevents powerful producers and vendors from suffering from decreasing demand for their goods and services. Despite all of the lofty reasons for the Fed doing this that or the other, stimulus is a politically driven agenda. Fiscal stimulus enriches powerful corporations which benefit from the activities, that are chosen for government projects. There is a net loss to society.

Another way to understand stimulus is to know that it really boils down to giving huge amounts of unearned money to the rich under the premise that money spent at the top will create activity within the rest of the economy.

The Federal Reserve cannot lower interest rates any longer. We are at the point where defaults will start occurring. Because of that, rates will start to rise regardless of what the Federal Reserve does. As it is, the Federal Reserve is under a political directive which says, do not let asset prices fall for any reason.

Central banks around the globe have been buying stocks outright for sometime now. When stocks start to slide, they will buy more.  At a moment of crisis, the United State’s central bank will announce that they are initiating an emergence equity buying program. to save the world. The reasons given will be similar to those used when the TARP bill was passed in 2008,

After the Federal Reserve announces a program to buy stocks “to save the economy”, they will not stop unless they are forced to.

Remember, the mentality in the United States is that the Federal Reserve and its policies are good and necessary. Ordinary Americans are actually being completely fleeced but they are completely unaware that their troubles have anything to do with the Federal Reserve.

Yes, the Federal Reserve is already supporting stock prices. Announcing an official program to do so, will enable them to buy huge  quantities of stock with the public cheering them own. That will be much more effective than buying stocks while pretending not to.

There is a good reason why the new stimulus will be nothing more than buying stocks. High asset prices are all that are all that is holding the economy up. Even a 10% correction would spin the whole country into a deep depression.

The public will be fleeced at much higher levels than it currently is.

About Fantasy Free Economics

James Quillian is an independent scholar and economist.
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