FIRE UP THE MONEY PRESSES!
The latest government jobs report – like the one before it – is terrible.
So why are stocks suddenly climbing after experiencing their worst week in several years last week? Easy: Investors believe the secretive U.S. central bank – the Federal Reserve – will now be left with no choice but to continue printing money in an effort to artificially prop up the flagging economy.
That means easy access to capital for bankers and select corporations (and cheaper borrowing costs for the government) … but a ticking time bomb for the rest of us.
To recap, the first round of money-printing (a.k.a. quantitative easing) – known as “QE1” – took place from November 25, 2008 through March 31, 2010. Over that period, the Federal Reserve added $1.7 trillion to its balance sheet ($300 billion in Treasuries, $1.2 trillion in mortgage backed securities and $175 billion in agency bonds). The second round, dubbed “QE2,” took place from November 3, 2010 through July 1, 2011. Over that period, the Fed added $600 billion in Treasuries to its balance sheet.
And of course in September 2012, the Fed began its latest and greatest round of money printing – an open-ended commitment to create $85 billion in new assets each month. That commitment was finally scaled back to $75 billion a month in January and $65 billion a month in February – a process known as “tapering.”
Armed with back-to-back disappointing job reports, though, anti-free market voices (and Wall Street crowd) are demanding the spigot be left on …
“The fact that bank lending remains weak is another sign of a need for more monetary stimulus,” writes Fortune editor Stephen Gandel. “The housing market recovery also appears to have stalled.”
Wait … the housing market recovery that we’ve been calling out for months as a fraud?
Gandel isn’t done …
“January’s job growth was nearly half what it was for the same month a year ago, which was down by a third from the year before that,” he writes. “Ask anyone who is looking for a job how hard it is to find one. Ask the former executive who has now settled for a part-time consulting gig about the job market. Ask the people who just lost their unemployment insurance. It’s pretty clear to nearly everyone that the economy is weak.”
Government “stimulus” has not worked … yet Gandel repeatedly says that the Federal Reserve should “keep its foot on the gas?”
There’s a quote about insanity and doing the same thing over and over that comes to mind. And a metaphor involving a cliff. And Charlie Brown and a football.
“Quantitative easing … is fundamentally a regressive redistribution program that has been boosting wealth for those already engaged in the financial sector or those who already own homes, but passing little along to the rest of the economy,” Anthony Randazzo wrote for Reason recently. “It is a primary driver of income inequality formed by crony capitalism. And it is hurting prospects for economic growth down the road by promoting malinvestments in the economy.”
We concur … the only real “stimulus” the American economy needs is government getting the hell out of the picture.