Will Fed stop taper of purchases if US economy slows?

U.S. GDP expanded in the first quarter of 2014 by only 0.1 percent. Yellen said it was “because of cold weather.” Critic Michael Pento predicted QEs 1,2, and 3 would not work, and the Fed will go to QE 4 and 5.
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BROOKINGS, Ore. - May 7, 2014 - PRLog -- Keynesian economists believe Ben Bernanke avoided a depression by increasing the monetary base 400%. David Stockman believes the Federal Reserve bailed out levered Wall Street after the crash of 2008-2009.

President Obama presents himself as champion of the working class. However, he received approximately $400 million dollars in political donations from investment banks. The five largest U.S. banks receive a large portion of their revenues from proprietary trading in leveraged derivatives, while controlling taxpayer insured banking deposits. They receive government bailouts when big bets go wrong.

Economists at the Federal Reserve accept the Phillips Curve, which states "increased inflation reduces unemployment." However, critics argue that money printing does no benefit the general economy. It only stimulates booms and nominal GDP. Real growth comes from a growing labor force and increased productivity. Which come from a stable currency, low taxes and free enterprise.

The prophet Isaiah said in Isaiah 1:23 & 24, “The nation’s princes consort with thieves, seek after bribes, and render corrupt judgments. Thy silver is become waste from dilution, and thy wine is mixed with water.” King David said, “Scales and balances are emblems of the Lord’s own justice.” Proverbs 16:11. Devaluation of a nation’s currency is a sign of moral decline. Greece, Rome, and the Ming dynasty, all fell because of a break down in morals, and debasement of their currency.

U.S. unemployment dropped to 6.3% in the first quarter, but labor force participation dropped to 62.8 percent. Aging Americans are dropping out and living off social security. Younger people are going on disability, and obtaining student loans. Unmarried mothers are obtaining food stamps and government assistance. If fewer people work, GDP will decrease. China’s GDP is growing at 7%, as the labor force and productivity grows.

Investment advisor Peter Schiff states the idea that Ben Bernanke saved the nation from an economic catastrophe omits two possibilities: one, that we have not recovered from anything, and two, his policies have laid the foundation for a larger financial bubble.

James Rickards believes QE 3 has given the Fed the freedom to change the amount, and the direction of asset purchases. QE3 is data dependent and they are not locked into a set program with respect to time and amount. They are free to continue the program forever. He believes the taper of asset purchases will not last.

David Stockman declares the problem with Keynesian economists is they only look at nominal revenue growth, but do not use a double entry balance sheet. They only focus on immediate gratification, but do not look at the consequences of long term debt.

18th Century French economist Frederic Bastiat stated that Socialists believe a boy throwing a stone and breaking the window of a baker would provide employment for window makers. However, they do not see the money the baker could have spent with the butcher or the candlestick maker, if he did not have to pay to fix the window.

Paul Krugman and Robert Reich believe government can use tax money or inflation to create jobs. However, what they fail to see is the money that could have been spent if the tax payer had kept his money or had not been robed by devaluation. A true economists focuses not on that which is seen, but that which is not seen. Low information voters focus on the hand of the politician, and not the source of his spending. Or they simply enjoy plunder.

Bernanke clearly stated the purpose of QE was to raise the rate of inflation, which in his mind was too low. Critics argue that money printing benefit’s the wealthy who invest in equities, gold and oil. A rise in commodities hurts low to moderate income workers, and those on fixed incomes, who pay a disproportionate share of their income on necessities.

Critics argue the Federal Reserve is a banking cartel designed to benefit the banks and the wealthy. Past and present voting members on the Federal Reserve, including Bernanke, Yellen, Powel, Stein, Duke, Raskin, and Tarullo, together own personally approximately $44 million in stocks. They have been employed by investment banks, or universities which obtain grants from banks. It is to their advantage to make sure the value of stocks appreciate.

Life, liberty, and property do not exist because men made laws. Each of us has a God given right to private property and to benefit from the fruit of one’s labor. Under socialism law is perverted to take private property from those who work, and redistribute it to non-workers. Frederic Bastiat declared it is impossible to introduce into society a greater evil than the conversion of the law into an instrument of plunder. Today 49% of Americans receive government entitlements.

John Maynard Keynes admitted that, “By a continuous process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. This process impoverishes many and enriches some. Inflation engages all of the hidden forces of economic law on the side of destruction, and does it in a manner not one man in a million can diagnose.” (Economic Consequences of the Peace, 1920). China is diversifying reserves out of U.S. currency and into gold.

Investor Kyle Bass has stated, “With the lack of nominal yield in the bond market, new money printed by the Fed is going into equities. Stocks are the only game in town. His caveat is that Zimbabwe’s stock market was the best performer this decade, until it crashed.”

Many experts believe U.S. equities will rise until an oil spike forces the Fed to raise interest rates dramatically. Many believe when the interest rate yield curve goes negative the bubble will break.

For more information on finance and the clash of worldviews see:


Dr. Stephen Johnston
Source:"Tea Party Culture War- a clash of worldviews"
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