The Fed’s surprise pivot away from any interest rate increases this year has boosted prices of stocks, high yield bonds and other risky assets in spite of nagging investor concerns about slowing global economic growth….. The quandary for the Fed is that easy monetary policy seems more effective in spurring asset values than it does in boosting prices of goods and services. The S&P 500 Index rose by an average 8.5 percent from 2014 through 2018, while the personal consumption expenditures price index increased 1.3 percent, well below the Fed’s 2 inflation target.”
But of course. We’ve been entrenched in a supply-side economy since the Reagan years, and the suppliers are the rich side. So, feeding the supply side of the economy creates richer rich people, not richer poor people. It leaves the poor people more dependent upon the rich for income opportunities.
Increasing the ability of the supply side does not increase demand; so, it does not and cannot create a healthy, balanced economy. I’ve argued for years that, if you want to create a sustainable economy, you take care of the demand side (the middle class and the poor) because they spend their tax savings on real things, not financial assets. That is why they are called the “demand side.” They create demand.
When they create demand, it is virtually guaranteed the rich will find or invent ways to fill that demand in order to get as much of that money from the middle class as possible. So, the money will always bubble up, but precious little of it will trickle down, as the rich have very fine filters to trap as much material as possible.
On the other hand, when you give the tax breaks to the supply side, such as the special capital gains tax rate that mostly benefits the extremely rich who make most of their money off of gains from asset trading, then it is certain the rich are going to concentrate their money making in precisely the area that requires the least amount of work and offers those low same tax rates on the next round of money they make. They’re going to make money gambling in the Wall Street casinos, producing nothing.
Read the rest here: The Great Recession
Mathematical models have been a wet dream of court economists since criminality was more profitable than being honest. End the fed. Understand Von Mises.
Dilly – Dilly!!!