Posted: Wed Sep 18, 2013 11:25 pm Post subject: The Economy withers, the Market goes nuts!
Think about it! For a week or two, the media have been stoking the public's fears by raising the worry that the Federal Reserve might announce a plan to gradually 'taper off' the $85 billion a month that the Fed's Open Market Committee spends every month, buying US securities.
I wondered, quietly, if these were conditions imposed by the Chinese, or maybe the Japanese? Why? Because otherwise, it made no sense. In my mind, it would likely lead to spiking interest rates, and the credit crash they have spent so many $trillions trying to avoid ... Put it this way -- it would lead to a situation that would demonstrate their failure to improve the US economy much over the past five years. We'd all be in the soup once again.
But then, ta-da ... the announcement comes. Bernanke says it for all to hear ... "the economy is not robust enough to allow tapering off to begin."
On hearing the good news ... that the economic recovery is too dismal to think about ... the market goes nuts. "Happy Days are here again ... The Skies above are clear again ..." The S&P jumps 150 points.
Proof positive that the Fed runs the stock market right now.
Question. If the economy now requires a $trillion+ annually to avoid a credit crunch ... what would be a better time to face the music than right now?
Fall is the serious season, in politics, and we see it even before the dust settles on the new tacit admissions by the US Federal Reserve -- that is, that the Fed's stimulus plan has been a failure -- and the House of Representatives takes its shot at de-funding Obamacare.
The politics of gridlock. On the one hand, the job of nationalizing one-sixth of the US economy -- medical services -- is overwhelming the administrators. On the other hand, providing 'free' medical care is a kind of sacred mission of the Democratic Party. It must go through.
It's causing huge changes throughout America, comparable to the 'student bussing' issue of the 70ies. Whole sectors of the 'service economy' are being converted to 'part-time' workers, for instance. Their employers can't compete, and pay the costs of US health insurance. It's too expensive.
The battle over the future funding of Obamacare is likely to lead to great rancor. Even many Republicans oppose de-funding because they fear they will end up being blamed for the shutdown, if it comes. Whoever gives in will be the loser.
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