Tag Archives: Ben Bernanke

Don’t Get Too Excited At The Stock Market Numbers Today

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The Stock Market reached record levels today. Normally that would be cause for celebration, but if you look at the reasons behind the rise in the stock market, the news doesn’t look quite so good.

Yahoo Finance reported today that the federal government will continue putting stimulus money into the economy for the near future because the economy is not growing at a satisfactory rate.

The article reports:

The Fed predicted Wednesday that the economy will grow just 2 percent to 2.3 percent this year, down from its previous forecast in June of 2.3 percent to 2.6 percent growth.

Next year’s economic growth will be a barely healthy 3 percent, the Fed predicts.

Fed officials decided to continue their $85-billion-a-month bond purchase program, surprising most economists, who had expected a slight reduction. The bond purchases have been designed to keep long-term loan rates low to encourage spending.

So what has this got to do with the stock market? Financial people expected the Fed to begin to slow its bond purchases, which would have begun the rise of interest rates. Right now, with interest rates at record lows, and the possibility of inflation, the stock market is a logical place to invest. As the Fed begins to pull back from its bond purchases, the stock market will fall slightly, mortgage rates will increase, and we will probably begin to see some serious inflation.

The stock market is currently being propped up by the Fed. I have not heard any good guesses as to what will happen when the Fed begins to slow down the money flow.

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Where Is The Economy?

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The economy hasn’t been in the news lately–there seem to have been a few other things going on–but the economy is something we do need to be keeping an eye on.

CNBC posted an article today describing where the country is economically.

The article reports:

GDP growth is in the midst of its longest sub-3 percent annual growth rate since 1929, the beginning of the Great Depression, according to Bespoke Investment Group. The economy hasn’t topped 3 percent since 2005—before Federal Reserve Chairman Ben Bernanke took over—and is unlikely to do so this year.

The article points out that in two months the revised economic numbers will show that the United States economy has grown to more than the currently stated $15 trillion. This has nothing to do with economic growth–it has to do with a change in the way that the size of the economy is calculated.

The article points out:

Under the new math, the government will add research and development spending, as well as the capital value of all books, movies, records, television programs and plays produced since 1929.

In jacking up the economy’s size, the revisions also will skew the ratio of debt to GDP, considered important in determining government spending.

Of course, the recent attempt at debunking a critical study of the ratio by Carmen Reinhart and Kenneth Rogoff also has dimmed the prospects for government debt-cutting. The two economists asserted that a 90 percent debt-to-GDP ratio restrained growth, but the data set they used has been challenged as faulty.

The new GDP calculations, combined with the souring on the Reinhart-Rogoff conclusions, likely will add to the thirst to keep Washington’s debt machine purring.

Meanwhile, the unemployment rate remains high.

The article reports:

Though employment has risen by 1.3 million over the past year, unemployment that counts the discouraged and underemployed, as well as the jobless (often called the “real” unemployment rate) has remained stubbornly high, at 13.8 percent of the workforce, according to the most recent count.

In fact, a state-by-state look at the numbers, released a few days ago and current through the first quarter, shows that just six states have real rates below 10 percent.

There are a lot of reasons for the high unemployment numbers. One of them is the fact that businessmen are reluctant to hire new employees until they understand the impact of Obamacare will have on their business. Uncertainty is creating an environment where hiring is at least temporarily delayed. The other thing to keep in mind is that as the government grows, it takes money away from the private sector. When the private sector isn’t growing, the economy isn’t growing.

There hasn’t been a lot of reporting lately on the economy, but we still need to be aware of what is going on around us economically.

President Obama Inherits The Mess Left By President Obama

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John Hinderaker at Power Line posted his take on yesterday’s election. He makes some good points. Because President Obama was elected, he will now be forced to reveal his plans for his second term. How does he plan to deal with the $!6 trillion dollar debt (he created almost half of it)?

The article reminds us:

Ben Bernanke can’t keep interest rates at zero for another four years; at least, I don’t think he can. As soon as interest rates start to rise, the budget–no, wait, we don’t have a budget, but you know what I mean–is blown. It will be difficult for the press to conceal from the American people the fact that we are broke.

The article concludes:

This year’s presidential election represented the culmination of a trend that has been developing for several cycles, in which the campaign barely exists outside of a handful of swing states. This year, it got ridiculous. If you lived in 35 or 40 states, you barely knew that it was an election year, at the presidential level, anyway. The result was a foregone conclusion across a broad swath of America. Undoubtedly that depressed turnout in the non-swing states. It would be easy to test my hypothesis; did turnout remain high in the contested states, and drop off in the others? If so, I think that is the answer. Still, the fact that Obama’s turnout dropped so much more than his Republican opponent’s shows that at least a few million Americans have wised up since 2008.

Neither Governor Romney nor President Obama campaigned in Massachusetts. If you wanted a yard sign for the Romney/Ryan campaign in Massachusetts, you had to order it online. This actually makes sense–a candidate has a limited amount of money and a limited amount of appearances he can make while running for office. Obviously, he is going to spend his time and money where it is needed and will do the most good.

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The Impact Of Quantitative Easing (QE3)

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Investors.com posted an article today on QE3 and the impact it will have on the American economy. The article points out that the economic problems America is currently experiencing are not due to a lack of money–their fiscal.

The article reports:

Fed chief Ben Bernanke defends the QE program, claiming Fed studies showed it boosted GDP by 3% and led to 2 million new jobs.

Even if true, the basic arithmetic is irrefutable: The Fed‘s tab for the QE program is now over $3 trillion. And most of that new money went to buy government debt — not to “stimulate” the private sector.

The article points out that banks and companies are currently holding on to their money rather than spending or investing it. One reason for that is the uncertainty about future tax policy and future federal spending.

The article concludes:

We don’t mean to sound conspiratorial, but a major Fed action coming just before an election is highly suspect — particularly when the sitting president’s foe has said he would not rename Bernanke to his Fed post in January 2014, when his term in office expires.

The government’s addition of $1 trillion a year to our nation’s debt hangs over this economy like a dark cloud, keeping entrepreneurs and big businesses alike on the sideline. The “fiscal cliff” we’re about to go over will sock Americans — especially entrepreneurs — with a tax hike of almost $1 trillion. That’s why the economy’s dead — not insufficient Fed money printing.

Bad leadership has consequences.

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