It’s becoming impossible to refute that our economic fate is being determined by feckless monetary and fiscal policies from Washington. Total reserves have ballooned 60 times? Where’s all the money? In the asset speculation casino. The reason US financial assets are so desirable is because the rest of the world is trying to follow the Fed’s lead, but investors know when the music stops, the US will be the best place to have your money and the gamblers will own the US by virtue of owning all those US$. This will not end well for most.
From the WSJ:
In her first Congressional appearance as Chairman of the Federal Reserve, Janet Yellen cheered Wall Street with her promise to continue the easy-money policies of predecessor Ben Bernanke.
While Ms. Yellen’s Senate testimony today is likely to attract more media attention, we’d say this week’s most important speech from the Federal Reserve system came last night in Texas.
Before a gathering of financial executives, Dallas Fed President Richard Fisher quantified how much money the central bank has been pumping into the economy. Mr. Fisher said that total reserves of depository institutions “have ballooned from a precrisis level of $43 billion to $2.5 trillion.” He added that “the amount of money lying fallow in the banking system is 60 times greater now than it was at year-end 2007. One is hard pressed to argue that there is insufficient money available for businesses to put people back to work.”
“It is my firm belief,” he continued, ” that the fault in our economy lies not in monetary policy but in a feckless federal government that simply cannot get its fiscal and regulatory policy geared so as to encourage business to take the copious amount of money we at the Fed have created and put it to work creating jobs and growing our economy. Fiscal policy is not only ‘not an ally of U.S. growth,’ it is its enemy. If the fiscal and regulatory authorities that you elect and put into office to craft taxes, spending and regulations do not focus their efforts on providing incentives for businesses to expand job-creating capital investment rather than bicker with each other for partisan purposes, our economy will continue to fall short and the middle-income worker will continue being victimized, no matter how much money the Fed prints.”