It’s settled…
For politicians, the chart sums up the frustrations that have helped propel the populism that Brexiteers and Donald Trump rode to victory.
While wages would never show swings on par with the likes of high-yield bonds, Bloomberg notes that the chart above illustrates how well financial markets recovered from the 2007 to 2009 meltdowns. By contrast, consumer price inflation, incomes and other such gauges of the “real” economy have put in muted performances.
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“We don’t know how effective QE has been because we don’t know what would have happened without it,” said Peter Oppenheimer, chief global equity strategist at Goldman in London.
Falling interest rates supported most financial assets, while for the economy “QE has been effective to prevent downside risk,” he said.
Economic growth and wage increases have disappointed in recent years, depressed by poor productivity gains and historically low labor-force participation — dynamics that lie outside the purview of central banks. Now that monetary policy makers are leaving the onus on governments to address growth, and contemplating the easing off of stimulus, the big question for investors is how resilient markets will be. For now, optimism prevails – everything from corporate-bond premiums to emerging-market bonds are flashing confidence.
But, as BofAML notes, perhaps it’s time for that to reverse…Economic Nationalism is back
Long Main Street, Short Wall Street
Electorates are voting for trade & immigration policies to boost wages on Main Street, not for central banks to support stock & bond prices on Wall Street.
Now, “the withdrawal of QE is sending a signal of confidence that central banks have in growth,” Goldman’s Oppenheimer said. “But undoubtedly we’ll get to a stage where rising inflation will push up bond yields to a level that will act as a damper on asset prices” across financial markets, he said.
And after yesterday’s rate-hike decision – in the face of declining real wages, weak retail sales, and collapsing GDP expectations – is there really doubt exactly who The Fed is working for…
Because there is really only one cohort benefitting from this…
The world is ruled by the hand that rocks the Federal Reserve Money Machine.
““We don’t know how effective QE has been because we don’t know what would have happened without it,” said Peter Oppenheimer, chief global equity strategist at Goldman in London.””
Global Equity Strategist – Hmm. I would not have this guy “strategize” my groceries. This is the problem, and why the real economy is stuck. All of these great “strategists”, PHd economists and the rest of the “elite” have no clue about what a real economy is built on. I can tell you, very easily a few things what would have happened if QE, changes to FAS 157 accounting, TARP and the rest of the “bailouts” had not been instituted;
1. The major TBTF banks would have had to eat their own cooking. There would have been bankruptcy proceedings, and the big 5 would have been sold off in parts. The CASH solvent banks, private investors, companies etc. would have bought their “assets” read: mortgages, commercial, residential, for pennies on the dollar. Then, would have been able to AFFORD to make deals with homeowners for principal reduction. How? Simple. If you purchase a mortgage for $100,000 or less in principal, then you can work a deal with the homeowner to reduce their principal and terms to say $150,000. You make a $50,000 profit, and have an interest stream for the next 30 years (or at least until they refi). Rinse, Repeat. Amazing, you can avoid foreclosure, keep property values from plunging, AND have a sustainable payment from a possibly good borrower. There are outliers, but you get the picture.
The MERS debacle and REMICS. MERS would become a non issue at bankruptcy, since the notes would become the property of new owners in bankruptcy, or the BK court and trustee could have a note drawn up. There may be title issues, however, it is a lot easier to work that out when you are working with borrowers instead of foreclosing on them.
2. Economy. Again, all of the fat and waste would be purged from the system through the bankruptcy process. Young, smart, ambitious entrepreneurs could enter the market and purchase equipment, office space, and supplies at discounted prices, with little debt, allowing them to build NEW businesses that can compete and innovate much better than the large behemoth corporations. Like green growth after a forest fire. These same entrepreneurs would hire some of the folks laid off from previous jobs. Wages would not be as high, but would not need to be.
3. Individuals that took on too much debt likewise would have to be purged through bankruptcy, but would also have a second chance in an adjusted economy. It would be easier to purchase things with CASH in an economy that is not artificially propped up by debt. People that went bankrupt could not get credit….GOOD. Purchasing for cash, at lower MARKET ADJUSTED PRICES is not only good for long term economic stability as a whole, but also is better for the individual.
The economy would have looked like the 1921 depression. What, never heard of it? Well that is because it was the shortest recession / depression in history. Why? Because the Government DID NOT get involved in it. The subsequent years (roaring 20’s) were some of the best growth years in decades. Maybe these “strategists” ought to spend some time looking at history and human nature instead of asking stupid, rhetorical questions…..instead, we currently live in 2 economies. The fake, fiat currency economy propped up by central banks, and the real, productive economy that is still stuck in 2008 because it is operating in reality, with still inflated asset values.
QE spells an opportunity for the bankers to loot
more $ from the US at our expense.