The Federal Reserve causes bubbles

The Federal Reserve note only can’t pull us out of this mess, but they caused it.  From John Hussman’s weekly market commentary on Sept 5th:

At the point our nation recognizes that the pattern of repeated bubbles, crashes, and misallocation of capital is not solved by the Fed but is instead caused by the Fed, it will become clearer that the best path to economic recovery is to shift attention toward debt restructuring, real investment, useful infrastructure, and the creativity and work ethic of real human beings. Until then, we will have an economy built on speculation and paper, stacked into a flimsy house of cards.

Some sound advice in additional comments:

The policies that the Fed is pursuing here distort market signals, create speculative incentives, and encourage the misallocation of capital. There should be no doubt that this will damage our economic future over time, but we will only discover exactly the form of that damage later. The best vision
for the United States is one where the markets allocate saving toward productive investments that legitimately have the potential to reward that saving, where the banking system finances good ideas and useful economic activity instead of looking for the next profit opportunity from financial engineering….”

In the same article he essentially announces that we are in recession given the data set they track.

Another interesting chart is one showing that government “transfer payments” in the form of unemployment benefits are at record levels.  This indicates support from the government of the economy as a whole, and of company’s profit margins.

I find this interesting because it is MMT – meaning government needs to spend into the economy during economic recessions.  Of course unemployment benefits is probably the least productive use of government money.  Imagine, for example, that money going to jobs in infrastructure.

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