The State of The Economy
The comments below are an edited and abridged synopsis of an article by Paul Craig Roberts
The economic boom is weakening, and the Fed is running the printing presses in order to purchase bonds, driving up bond prices and lowering interest rates
Some European countries now have negative interest rates. One reason for this is the belief of neoliberal economists that consumers would prefer to spend their money than to watch it gradually wither away, and that the spending will drive the economy to higher growth.
It is difficult to know the economy’s growth rate, because the measures of inflation have been tampered with in order to avoid cost-of-living adjustments for Social Security and the payment of COLA adjustments in contracts. The CPI is an illusion, and so is the low unemployment rate.
The Fed’s low interest rate policy has only served corporate executives and shareholders. Corporate leaders and owners benefited by harming the US economy, the careers and livelihoods of the US work force, and their own companies.
Economists wonder about the high price/earnings ratios of US stocks and the 26,000 Dow when stock buy-backs indicate that US corporations see no investment opportunities. How can stock prices be so high when corporations see no growth in US consumer income that would justify investment in the US?
The plunge protection team brought together the Fed, Treasury and Securities and Exchange Commission in a format that could intervene in the stock market to prevent a fall. The easiest way to do this, when faced with falling stock prices, is to step in and purchase S&P futures. Hedge funds follow the leader and the market decline is arrested.
The Fed can intervene in any financial market. The Fed or its proxies intervene in the gold market to support the value of the US dollar by printing naked gold contracts to drop on the gold futures market in order to knock down the price of gold. A rising gold price would show that the dollar support arrangements that the Fed has with other central banks to maintain the illusion of a strong dollar is a contrived arrangement rejected by the gold market.