Author: John King, Quacera
Covestor model: QPM Radar
Disclosure: none
Janet Yellen made a speech in which she put to rest any idea that the Fed will raise rates soon. While admitting that oil and food prices are surging, she states this is a “temporary phenomenon.” She put forth the money printers’ mantra that all this confetti they are spewing across the world is good for us. Ignoring the fact that it has taken $1.2 trillion of the stuff to lower official unemployment by one percent while the aforementioned prices are way up, she belies a blind faith that Fed policy will have a salutary effect and all will benefit in the long run.
Addiction to the printing press is not that unusual, but it is a scheme that never ends well. Analysts are quick to point out that the stock market is higher and this must be a good thing. What they ignore or never learned is that the local markets in local currency can go parabolic when the fisc is run as we are doing now. What is lost is purchasing power relative to goods that consumers need to survive.
In the Weimar hyperinflation, the German Bourse skyrocketed while goods could not be made fast enough to supply those who wanted to buy. Shops had to close daily for lack of inventory and unemployment got to zero. The seeds had been sown by the governments’ financing
of WWI, but the resulting inflation that collapsed the economy was only temporary as well, lasting 3 years – from 1921 to 1923 – and destroyed the entire middle class while reducing the general population to poverty and starvation.
Ms. Yellen needs a history lesson but in the meantime she needs to be ignored by anyone attempting to deal with the economic mess she and her ilk are spawning.
