Botox and free manure
In August 2010 we heard from Alan Greenspan, the then Chairman of the U.S. Federal Reserve, that “The problem we now face is the most extraordinary financial crisis ever seen or read about.”
In 2011, a book by Peter Tanous and Jeff Cox was written to enlighten us that we were about to face the worst financial disaster in American history – “a financial Armageddon.” They also told us that, “The U.S. Treasury will shift its printing presses into high gear as it churns out billions of dollars to cover debts, which will eventually lead to “soaring inflation of an order not seen since the 1970s.”
Along the way Ben Bernanke took over the Federal Reserve and told us not to worry, he had it totally under control by bringing interest rates down to zero (ZIRP) and printing billions of dollars to cover the borrowing capacity that was needed to keep the United States and its banking community in good shape; and he did it while providing the warm feeling for investors to keep the stock market in a rising mode from 2009 to today.
Then, more recently, along came another Chairman of the U.S. Federal Reserve – Janet Yellen – and now the market is looking for Dow 20,000, and she carries the nickname of “Fairy Godmother of the Bull Market.” allowing most U.S. investors to get used to reaping great gains after the head of the Federal Reserve spoke, especially at Jackson Hole in Wyoming where the Federal Reserve has held its “Economic Symposium” ever since Paul Volcker was its Chairman in the 1970s – he liked the fishing.
In 2007, “Helicopter” Ben Bernanke stated that the Fed “stands to take additional action to stabilize the market and the Dow shot up by 199 points. In 2008, Bernanke introduced zero interest rates (ZIRP) and the Dow jumped 197 points.
In 2010, Bernanke only had to hint that Quantitative Easing #2 was on the way and the Dow, once again, went up – this time by 164 points.
Those investors who were able to act quickly after his speech were able to bank a 20% return over the balance of the year to 2011.
And then, in 2011, Bernanke did not say anything, but he did hint that unemployment was too high and that he would do whatever he could to try to reduce it; and guess what? Notwithstanding that he did nothing about unemployment, the Dow went up another 134 points.
Recently it was Janet Yellen’s turn to spend a few days at Jackson Hole in Wyoming and in her opening speech “Re-evaluating Labour Market Dynamics” she acknowledged that the stock market is sitting at all-time highs, but the labour market is still not very happy.
She did not make any promises or commit herself to do anything about either the stock market or the labour market, other than keeping interest rates very low a while longer. She said that, “Monetary policy must be conducted in a pragmatic manner that relies not on any particular indicator or model, but instead should reflect an on-going assessment of a wide range of information in the context of our ever-evolving understanding of the economy.”
Bernanke never told us anything like that, and maybe that was his stock market magic bullet. Mrs. Yellen did admit a small negative about the job market, saying that it still is in trouble; five years after the recession began its decline “the labour market has yet to fully recover” and “people that are employed have seen a pitiful increase in wages,” allowing that “over the past several years, wage inflation has averaged about 2 per cent” and that “there has been little evidence of any broad-based acceleration in either wages or compensation” which she recently called, “worker discouragement and a still-substantial level of long-term unemployment.”
It’s hard to blame “discouraged workers” for not enjoying their jobs at low wages while watching the stock market make higher and higher prices as a result of the Federal Reserve’s continuous printing of money and the creation of a “Botox Economy.”
The best comment I recently read on that topic was that it was easy to believe that CEOs, banks, and shareholders were coming up roses, while the working middle class folk were making the manure that made those roses grow.
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