There are as many theories regarding the Federal Reserve and the recent policies undertaken since the financial meltdown. In this article by Chris Martenson, he clearly demonstrates the policy of the Federal Reserve and avoids getting into the whys of the policies. His analysis of the comments by the chairperson’s testimony is rational and important to investors in today’s market. With the easing of the money supply since the financial meltdown, the equity stock market became the benefactors of the Federal Reserve’s actions, not bonds, currencies or real estate. This is now common knowledge but the real questions are why did this happen, why did stocks receive all or most of the benefits, and what were the benefits gained / lost.
In my opinion when looking back at the times of the financial crisis, most of the literature of the decisions made happened during TARP with new legislation. The decision to take the action was deferred from the political braches and left with the Federal Reserve. This similar to the card game euchre when if no one playing calls a suit, the deal is left making the decision. Another way of saying the political braches outsourced the decision. For this group, they gain deniability if anything goes wrong since their hands are not on anything. Brilliant politics. Bad for the economy. The bad part is that this is creating non-markets, i.e. bubbles, which will cause more pain in the system, recessions, etc. This answers the first two questions but what about the last question: what was the benefit gained / lost.
LEAN SIX SIGMA TEACHING POINT: This seems like a question for former chairperson Greenspan. His ability to gather data from the BLS archives and make sound decision is unique in any era. Using our DMAIC approach and COPQ methodology, I think we can gather enough data to pose the current states from two time periods for the comparison (2008 versus 2013). We can judge if there was a global winner or loser in the two states. Within each current state is where the segments will also display the winners and losers. This can be bonds, equities and real estate to name a few.
I led you to the water. Is anyone ready to drink?
Article Link: http://www.marketwatch.com/story/the-fed-is-deliberately-stealing-from-savers-2014-10-22/
Gary Kapanowski – Lean Six Sigma Master Black Belt – Excelsior
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