Mayfair, that toney part of central London nestled amidst Buckingham Palace and Hyde Park, is one of the most famous pieces of real estate in the world. Sleek, aristocratic and rich, it has a storied history. The great nineteenth century novels about the lives of England’s ruling class took place there, and the super-affluent who set today’s more multicultural ethos now call it home.
Marc Faber, the famous economic scold and skeptic who predicted the 1987 stock market crash, has adopted “the Mayfair economy” as his metaphor for the Federal Reserve’s latest round of quantitative easing, dubbed QE3. Faber asserts that this policy is not benefiting the broad public that it is supposed to help, but rather the richest part of society, the very crème de la crème, whose wealth is held in financial assets.
He points out the paradox (the scandal, really), in an interview on CNBC
This unlimited QE, buying mortgage-backed securities (MBS) and continuing Operation Twist, has the implication of simply having asset prices go up and the money flows down to the Mayfair economy.
QE helps rich people whose asset prices go up and whose net worth then increases but it doesn’t flow to the man on the street who is faced with higher costs of living with price rises. You just have a small economy that is booming but the majority of the economy is damaged by QE.
It’s hard to argue with his point. As measured by the major stock market indices, four years of quantitative easing have restored the markets to their pre-2008 crash levels. But the deeper symptoms of economic malaise- stagnant growth and high, prolonged unemployment- persist with little improvement in sight. Likewise, the federal government’s stimulus activities and regulatory excesses have yielded little in terms of practical results.
Paradoxically, it is the fabled “One Per Cent” who may be the biggest beneficiaries from progressive efforts to manage the economy.
Photo credit: Dick Bauch via Wikipedia
The Federal Reserve, reacting to sputtering job numbers, has cut back on its growth projections for the economy. The nation’s central bank is extending its Operation Twist program and plans to pump $267 billion into the long-term bond market in an effort to lower interest rates, which are already at rock-bottom levels. (As the famous saying goes, “a billion here and a billion there, and soon you’re talking about real money!”)
By giving up on any noticeable improvement in employment for 2012, the Fed’s action will no doubt intensify debate on the most important issue of the upcoming presidential campaign: jobs, jobs, jobs.
Read more at money.cnn.com.
From The CATO Institute:
Posted by Daniel J. Mitchell
To put it mildly, the Federal Reserve has a dismal track record. It bears significant responsibility for almost every major economic upheaval of the past 100 years, including the Great Depression, the 1970s stagflation, and the recent financial crisis. Perhaps the most damning statistic is that the dollar has lost 95 percent of its value since the central bank was created.
Notwithstanding its poor performance, the Federal Reserve seems to get more power over time. But rather than rewarding the central bank for debasing the currency and causing instability, perhaps it’s time to contemplate alternatives. This new video from the Center for Freedom and Prosperity dives into that issue, exposing the Fed’s poor track record, explaining how central banking evolved, and mentioning possible alternatives.
Americans still see the economy as THE issue- and they’re not happy!
You have to hand it to The Washington Examiner. Their recent editorial put’s it succinctly: “Time to admit Obamanomics has failed”.
Today Wall Street is reeling in the wake of the Fed’s recent signals that the economy is weaker than expected, forcing the central bank to keep interest rates artificially low and expand the money supply. But this initiative is sailing against the winds of the core policies of Obamanomics: out-of-control spending, the mania for corporatism with all its nanny state regulatory apparatus, and, looming ominously on the horizon, the expiration of the Bush tax cuts.
Christina Romer, who recently resigned as Chair of the White House Council of Economic Advisors, promised that the huge stimulus bill passed in early 2009 would produce an unemployment rate of 7% by this summer. It is stuck at 9.5% and recent job creation statistics are awful.
You would think that liberal Democrats would be in the mood for self-evaluation. But they are like the Bourbons- they learn nothing and forget nothing. The Democratic response to our economic malaise is to offer a witches’ brew of new poisons. The Examiner notes that the recently enacted Wall Street “reform” bill entails 533 potential new regulations. The office of Senator Max Baucus has been trying to sell the pending Small Business Jobs Bill and offers some interesting justifications. You see, the bill will be ”repealing tax cuts” (that’s Washingtonspeak for raising taxes) on large oil companies. And the bill rushes to the relief of small business with a remedy for the onerous Form 1099 tax reporting requirements buried in the health care reform bill:
it exempts businesses with fewer than 25 employees at any time during the year from the requirement to file information returns on payments for goods and property. For businesses with more than 25 employees, the alternative also raises the threshold for reporting purchases of goods and property from $600 to $5,000. Many small businesses will not have cumulative purchases of more than $5,000 from any one vendor. The proposal also exempts all purchases made with a credit card from information reporting.
Now that will certainly incentivize small firms to add a 26th employee! And of course all entrepreneurs live to sift through their expenses at year end to determine which vendors fall above the 5K limit.
At any rate, the current climate in Washington does explain Michelle’s recent excursions to Spain and France, and the president’s fascination with Europe. It’s all Bourbon territory. If you’re a devotee of Ancien Regime economics, it’s inspirational!