Economic Frankenstein

According to the Department of Labor, 148,000 jobs were created in September.  The experts thought the number of new jobs would be closer to 180,000.  Still, the unemployment rate dropped a tenth of a percent to 7.2 percent.

No doubt, the weak jobs report gives the Fed additional cover to continue creating $85 billion from nothing each month to prop up mortgage and treasury markets.  The Fed believes all this funny money will, somehow, create new jobs.  This seems kind of absurd, don’t you think?

Thus, it’s no surprise the jobs the Fed promised still don’t exist.  But the side effects of their mass money debasement are sticking out further than President Obama’s ears.  At the moment, the stock market’s the most obvious deformation.  Under the thrust of extraordinary monetary policies, stocks are shooting to dizzying heights.

Here at the Economic Prism, we don’t agree with this heavy handed intrusion into markets.  But we can’t ignore it.  Nor can we stand in the way of it.

At the very least, we should enjoy the magic of rising stock prices…and you should too.  There’s no telling how high stocks will rise, or when they will fall.  But if the Fed has anything to say about it, stocks will go up forever.

Provocatively Accurate

After indefinitely tabling the possibility of tapering back asset purchases last month, there’s no telling what the Fed will do…particularly, when Janet Yellen takes over in January.  Who knows?  Maybe they’ll never taper back.

But they wouldn’t push further down on the accelerator, would they?

“The question is not tapering,” said Marc Faber, on Monday.  “The question is at what point will they [the Fed] increase the asset purchases to say $150 [billion], $200 [billion], a trillion dollars a month.”

Faber, if you didn’t know, is publisher of The Gloom, Boom & Doom Report.  At first glance, the question he raises seems overly provocative.  Nonetheless, Faber has a supernatural ability to be provocatively accurate.

When most economic writers were predicting tapering prior to the Fed’s September FOMC meeting, Faber was predicting “QE infinity.”  Perhaps he sounded outrageous at the time.  But he was right.  Moreover, he’ll likely be right again.

When it comes down to it, the Fed doesn’t really have much of a choice.  They’ve encouraged the U.S. government to run up the debt, and they’ve backed an unbearable system of entitlements.  There are now over 100 million dependents who demand it.  If they stop continuously expanding the monetary base all the benefits, entitlements, food stamps, and transfer payments, come to an abrupt end.

Economic Frankenstein

The U.S. economy, at least the part of it that’s dependent upon the government, has become a grotesque monstrosity.  What’s more, without the Fed and its endless supply of credit, things could have never gotten this far out of control.  The whole thing would have cracked and crumbled long ago.

Year after year the Fed has tried to improve the world by giving it too much of what it wants…money.  Congress and the President have taken the cheap credit because it’s the expedient thing to do.  It has allowed them to deliver what appears to be something for nothing to a populace eager for handouts.

Unfortunately, the Fed’s best intentions have birthed economic Frankenstein.  Like Victor, they thought their creation would be beautiful.  Instead they created a hideous and repulsive monster.

“Our mission, as set forth by the Congress, is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly” remarked Ben Bernanke upon being sworn in as Federal Reserve Chairman.

By all accounts, Bernanke sorely missed the mark.  From our vantage point, he never should have tried to begin with.  With hindsight to now draw upon, what will Bernanke say upon his exit?

“I had begun life with benevolent intentions and thirsted for the moment when I should put them in practice and make myself useful to my fellow beings,” said Victor.  “Now all was blasted; instead of that serenity of conscience which allowed me to look back upon the past with self-satisfaction, and from thence to gather promise of new hopes, I was seized by remorse and the sense of guilt, which hurried me away to a hell of intense tortures such as no language can describe.”

Thanks to Bernanke’s handiwork, the money base of America is forever ruined.  Economic Frankenstein is his gift to the world.


MN Gordon
for Economic Prism

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