October 30, 2014
Santiago, Chile
Do you remember all the great economic forecasts that ever came out of the Fed? I don’t either.
My favorite one was when 9 months before the Great Recession kicked off, the Fed Chairman, Ben Bernanke, remarked: “The Federal Reserve is currently not forecasting a recession.”
We all know of course what happened next. These people have a horrible track record. This is not a dig at anyone personally, it’s just simply a fact of how the system works.
So yesterday the Fed, under Chairwoman Janet Yellen, announced that they’re bullish on the economy. That the economy is doing well, so they’re going to stop their asset purchase program a.k.a. Quantitative Easing.
First of all, QE should never have happened. It was the single worst policy decision for the US dollar. The Fed expanded its balance sheet by more than a factor of five using QE in only a few years.
What effect has it really had? The whole world is starting to ditch the dollar, banks have been recording record profits, US and worldwide debt has surged to astronomical figures, and asset prices across the board have reached record highs.
Everything, from house prices, stocks, bond prices and collectibles is simultaneously at all time highs. This is NOT normal.
It has enormously benefited those at the very top. Yet for the average people it has largely been destructive by ruining the purchasing power of their dollars.
So while it’s good that the Fed is ending its destructive program, the reasons behind it are completely screwed up. Their analysis whether the economy is healthy starts from a wrong premise.
We discuss this in today’s podcast.
How wealth can’t be conjured out of thin air. How GDP growth figures aren’t important at all. The three factors that really matter to measure wealth on an individual and macro level. And what you can own that will do well in an inflationary OR deflationary environment.
