How The Fed's Inflation Policies Crucify Workers In Pictures

Another Fed-induced asset-price bust is baked in the economic cake.

Meanwhile, a debate is taking place why economic growth is so low.

Secular Stagnation Thesis

In 2014 economist Larry Summers proposed Secular Stagnation is what ails the economy. Summers proposed “It may be very difficult for investment to absorb all saving.

In 2017, Summers doubled down on his secular stagnation thesis. He blames austerity for the lack of inflation. His purported cure is more public investment.

Savings Glut Thesis

In 2005, former Fed chairman Ben Bernanke proposed economic growth was slow because of a Savings Glut.

Bernanke defines the glut as an imbalance between savings in China and consumption in the US.

Quick Rebuttal of Bernanke, Summers

To Larry Summers I suggest Deficit spending is out of control globally. If more public spending was the answer, Japan would be the shining beacon of global excellence.

To Ben Bernanke I say, Let’s not confuse “savings” with monetary printing. In the classic sense, savings = production minus consumption.

The bulk of what’s been “produced” is dollars out of thin air, yuan out of thin air, euros out of thin air, and yen out of thin air.

In their analysis of “savings” both Summers and Bernanke ignore the massive buildup of debt that has occurred.

To the extent there is an imbalance between the wealthy and not wealthy, Fed policy exacerbated the problem.

History Lesson

The Fed bailed out the banks in 2000. At that time banks were troubled by soured dotcom bubble loans and loans to foreign countries like Argentina.

The result was a housing bubble as Greenspan kept interest rates too low, too long.

In 2009, the Fed bailed out the banks when the housing bubble burst.

Since then, the Fed’s inflationary policies benefited the asset holders, the banks, and the top 90% of wage earners at the expense of everyone else.

Current Account Balance

Credit Explosion

Prior to Prior to Nixon closing the gold window, countries could not run massive fiscal deficits for years on end without hiking interest rates.

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Dean Gilmore 3 years ago Member's comment

I don't believe the Fed can create wealth.

Duanne Johnson 3 years ago Member's comment

The fed is all about protecting the banks and nothing else. Worker's wages suffer as a result.

Alexa Graham 3 years ago Member's comment

Is that the job of the #Fed?

Texan Hunter 3 years ago Member's comment

These images say it all.

Old Time Investor 3 years ago Member's comment

What do you suppose would have happened had Nixon not closed the gold window in '72?