Fed Led Boom Bust – Happy Days Are Here Again

So I made the mistake of tuning into CNBC today and geez I don’t know why I punish myself so.  It winds me up like an old Swiss watch.  I swear knee pads must be mandatory when the subject of the Fed comes up in that studio because they all immediately drop to their knees and start sucking.  It got me thinking whether or not these folks are really that stupid or if they’re just simply whores.  Whores don’t bother me quite so much as stupidity.  Anyway I wanted to look at some of the relationships we’ve seen during periods of aggressive monetary policy.  Specifically, is there any reason whatsoever to believe that printing ridiculous amounts of money and buying debt leads to increased output and improved living standards?

Let’s start by just looking additional debt and additional GDP.

total debt.gdp.m2

So what we’re looking at in the above chart is the change in GDP – change in debt (blue line).  What we find is that until 2000 GDP typically outpaced debt (blue line above zero).  Subsequent to 2000 $1 of additional debt resulted in less than $1 of additional output (blue line drops below zero).  This might be obvious given total debt to GDP has been rising.  But what makes things more clear is when we throw real median household income in the mix.

median to debt.gdp

Pretty clearly we see that as debt outpaces GDP the working class has a reduction in standard of living and debt has been outpacing GDP for 15 years. Now let’s look at living standards from a slightly different angle.


Well that looks pretty healthy eh? Since 1995 we’ve had a 33% increase in the amount of senior citizens being forced to work while having less jobs for the nation’s prime working age folks.  As much as I like to make fun of the intelligence of our friendly neighborhood central bankers the majority of them are not stupid.  And so that only leaves us with corrupt liars.  Please note that isn’t an ad hominem it’s just a logical proposition.  The Fed tells us they are doing the things they do to improve the overall economy and for the betterment of the middle class.  However, the policies they implement do anything but achieve such an objective.  So then what is their objective? Let’s have a look.


And while real median incomes are down 10% since around 1997 (when the printing machines went into overdrive) market capital is up some 300%. Given the bottom 50% don’t own stocks directly or via managed funds it doesn’t seem to do much for standard of living improvements outside of those who have large proportion of their net values in the markets.  What does that mean?  It means Fed policies while making the rich grotesquely richer have made the working class worse off.  Rich = richer, middle class = poorer.  Ok very simple stuff.

The point being the Fed’s stated objective cannot be their true objective given the historical data.  What does appear to be their true objective is to make the rich richer as evidenced by historical data.  Perhaps I should put a call into Ms. Yellen and just give her the heads up?  Or do you think she’s probably well aware of this fact?  Why do we allow these assholes to blatantly lie to us all of the time?  This small group of highly corrupt individuals are essentially robbing the middle class Americans and transferring that wealth to those on top.  The largest transfer of wealth probably in the history of the world is about to occur upon the next bubble bursting.

Today the Fed has effectively forced the largest retiring generation in our history to put their entire life savings into stocks by driving their ZIRP policies.  And so when the bottom falls out this next time the vast wealth long the market will end up being bought up by the top .1% for pennies on the dollar.  That is how wealth is transferred in the boom bust world of a Fed led economy.  Happy days are (almost) here again……..