Fed Is Misled by Wealth Effect | Forex Factory

  • Fed Is Misled by Wealth Effect

    From bloomberg.com

    When will these guys ever learn that maybe, just maybe, these Fed policies aimed at targeting asset prices at levels above their intrinsic values is probably not in the best interests of the nation? -Dave Rosenberg, chief economist and strategist at Gluskin, Sheff Not long ago, I was listening to former Federal Reserve Chairman Ben Bernanke discuss the central bank’s actions during and after the financial crisis. I came away very impressed with how thoughtful and intelligent the former head of Princeton’s economics department was. Combining a deep academic background in the Great Depression with outside-the-box ... (full story)

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traderathome
Feb 6, 2014 11:25am
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Great article ferreting out the truth about the flaws in Fed manipulations and reasons for the manipulations.

The greatest point made is that rising equity valuations do not cause rising spending and economic growth, because so few Americans are participants. Only the super-rich truly benefit. As for trickle down, the article is right there also. The super-rich have no intent to let a single drop of their wealth trickle down to anyone else!

1. Kill the Fed policies based on the "Wealth Effect" (read that as transfer of more wealth to the super-rich).

2. Kill the super-rich with super increases in personal and corporate taxes and total cessations of subsidies to them.
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Ill-b-back
Feb 6, 2014 3:02pm
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"In other words, all of the same forces that drive a healthy economy, leading to happy consumers spending their plump paychecks, also drive equity markets higher. The Fed, though, seems to think that the stock-market tail is wagging the fundamental economic dog".

Yeah the Fed are a collective genius, specialising in putting the cart before the horse.


"As we saw in the mid-2000s, it wasn't the wealth effect driven by rising home prices that led to greater economic activity, but rather access to cheap and widely available credit".

And we all know how that ended.....

Question is: Will it stop them from making the same mistake again?

I seriously doubt it.
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Trader#0B6F
Feb 6, 2014 11:31am
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Quoting traderathome
Great article ferreting out the truth about the flaws in Fed manipulations and reasons for the manipulations.

The greatest point made is that rising equity valuations do not cause rising spending and economic growth, because so few Americans are participants. Only the super-rich truly benefit. As for trickle down, the article is right there also. The super-rich have no intent to let a single drop of their wealth trickle down to anyone else!

1. Kill the Fed policies based on the "Wealth Effect" (read that as transfer of more wealth to the...
Mr. Bill Gates does... he donated more than 20 Billions of his money... but strange he's still rich...
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PaulAmbrose
Feb 6, 2014 4:08pm
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Oprah just loves guys like Traderathome
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Trader#0B6F
Feb 6, 2014 11:35am
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what i mean is: there are some of the super rich who care poor people although not many... i think Bill Gates is one of them.... he now focus to his foundation now to help people....
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Trader#2546
Feb 6, 2014 1:29pm
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Who would have thought that making the rich even richer wouldn't do anything good to the economy!?
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