Fed, please taper, I beg you…
The transmission mechanisms that distribute liquidity to consumer demand labor are broken. More QE just feeds the supply-side of the economy making it more and more top-heavy. There is evidence of a bubble forming from Tim Duy. The Fed is making the economy more and more unstable as time goes by.
The imbalance between capital and labor is made more dangerous with QE. Capital needs to be restrained. They have too much power to control production and profits. Whatever liquidity is gained by labor is instantly gobbled up by business like piranhas. As labor’s liquidity has been whittled away over the years through wage stagnation, labor saves less and less.
A recession will come within 2 years. Unemployment will not reach 6.5% before that happens. And if the Fed is still providing QE, I have to ask, what is the point of QE? With labor’s liquidity so low and the transmission mechanisms to labor broken, what really is the Fed thinking it will accomplish?
And when economists say that tapering may cause a recession, I don’t buy it. My research shows that real GDP must reach the effective demand limit before a recession will happen. It may slow down a bit, but a recession will not happen with tapering. And slowing-down the economy in order to restrain the dangerous imbalance that is once again growing between capital and labor has more social benefits than social costs.
So Fed, please taper, I beg you on behalf of labor whose power is weak and getting weaker as capital gets what they “whine” and dine for more and more. The standard of discipline upon capital has been lowered so far down, that capital has acquired a state of immaturity. People want money for themselves and don’t want to give back to society.
Fed, start disciplining capital. Restrain their power and their freedom. Make capital raise their standards of socially productive investment. They are destroying good society. And it is time to bring balance back to our economy which is being overly dominated by capital who has the freedom to move money anywhere in the world. Labor does not have the freedom to move their wares like that.
Don’t worry about causing a recession or even a slow-down. The future recession is already established in relation to the effective demand limit. You can’t make one happen now.
Please, just taper. Start raising the social standards of monetary policy toward a better society and away from the private interests of those with a greed to wring out labor’s liquidity with a seeming unfeeling cruelty.
Fed, taper… now.
Good one Ed, good one — though I don’t know whether Fed money is making situation worse or has reached absolute limits of mitigation.
Wonder as well about organizational structure —
[12 Money Center Banks]
– [Treasury/Fed Complex] with, I believe, a guaranteed 25 bps paid by Fed as interest on reserves – perhaps this is a constraint.
But sure enough, wage/profit share is decades out of line, as is productivity gap.
Ed you see QE as simply pumping liquidity to capital. Okay I get that.
On the other hand I see QE serving to reduce real debt service as a burden on future workers (including labor) by not only serving to remove high interest rate instruments from the market and replacing them with low interest rate ones, but in having those high interest rate instruments actually returning their ‘debt service’ to the Treasury in the form of rebated Fed profits.
Now it may well be that the effects of flooding Capital with ever cheaper money more than swamps out the postiive effects of what would seem to be a shrinking share of actual funded debt service as a share of GDP or actual tax revenues. But I am not seeing any discussion of any such possible offset, or even anything that would just show that the effects were de minimis.
Because it would seem that one man’s ‘free money’ equally translates to that same man having to lend that money back to the government at the lower bound. Or invest it in ways that actually increase productivity.
I guess I am having a hard time understanding why a tapering policy that would lead to higher interest rates on government securities and thus seemingly just a bigger take by rentiers as opposed to productive investors is a good thing. Because it sure seems to me that an increasing share of Debt Service on Public Debt is never in any real world sense actually exiting Treasury. Because the Social Security Trustees are largely retaining their interest while the Fed is rebating theirs. Surely that $5 trillion plus weightless debt elephant is having SOME effect.