This inane interrogation of Yellen, which accused her of taking growth out of our children’s futures, had the senator perform all sorts of verbal gymnastics about time travel that seemed more like a parody episode of Saturday Night Live rather than the semiannual Humphrey-Hawkins testimony.
Never mind that the senator knew less than nothing about how economies really work. Never mind that he ignored two absolutely fundamental premises of capitalism – that consumer demand is infinite and that we are only constrained by our resources and by our imaginations in creating new products and new services that generate “growth.”
The senator somehow had some Calvinist idea that there is only so much economic bounty that we can generate. But perhaps most disappointing of all was Yellen’s hapless response, which seemed to offer only the tepid reassurance that no – we haven’t quite reached peak capacity and that QE can still provide meaningful stimulus.
|Is spending on infrastructure a better solution than the central bankers’ QE policies?|
QE of course is now a joke. The world’s central bankers are literally giving trillions away, and they still can’t generate even 200,000 new jobs on a good month.
Everyone hates the central bankers, and every Western government is spawning its own little fascist politicians, who promise the people to “shake up the establishment,” but who will instead lead them to unmitigated disaster by curtailing trade, closing off borders and stumbling into wars.
The problem is that we are printing the wrong kind of money. Central banks can only control what is known as “inside money” — i.e. money that sits as reserves with the banks. By lowering the price of money to less than zero, they have simply managed to make the rich richer by inflating all financial assets for the past five years. Meanwhile, average incomes have been stagnant for nearly a decade. In fact, they only started to rise this year, and that is why U.S. growth has been anemic.
The Fed is trying to do Congress’s job without congressional power, and that is why we have dysfunctional economy that can’t seem to get out of bed.
|“The Fed is trying to do Congress’s job without congressional power.”|
The U.S. needs at least $2.5 trillion in infrastructure spending. Roads, bridges, highways and certainly airports need major overhauls. In fact, if you travel frequently overseas, the “infrastructure gap” is becoming a national embarrassment.
America literally is turning into a Third World nation before our own eyes. You don’t even have to travel far to see the stark differences. Every few months, I pop to Vancouver to see the kids, and I am constantly astounded at the efficiency and modernity of that society compared with ours.
Spending on infrastructure is the perfect solution for “helicopter money.” It’s labor-intensive, capital-intensive work that should translate into higher incomes and should boost final demand in ways that QE was never able to.
The good news is that both Donald Trump and Hillary Clinton (prodded by Bernie Sanders) realize that this is the path forward. Regardless of who gets into office, the politics of “balanced budgets” and “fiscal austerity” are likely to give way to a more pragmatic and aggressive domestic spending policy.
Ultimately that should be good for growth and good for the stock market, but given the unprecedented level of vitriol in this year’s election campaign, the path to economic redemption is sure to be rocky.
End of the EU? On the eve of the Brexit vote, more than 1,285 business chiefs with operations in the U.K. urged British voters to choose to remain in the European Union. According to the polls, the vote remains too close to call, although the “Remain” side appears to be gaining some ground in the final days before Thursday’s vote. In a letter published in Britain’s The Times newspaper, business representatives, including from half the companies in the blue-chip FTSE 100 index, said a Brexit from the EU would hurt the U.K. economy.
“Britain leaving the EU would mean uncertainty for our firms, less trade with Europe and fewer jobs,” the letter said. “Britain remaining in the EU would mean the opposite: more certainty, more trade and more jobs.”
End of the Nuclear Era? PG&E Corp. is proposing to close two reactors at Diablo Canyon over the next decade as California expands its use of renewable energy. CEO Tony Earley said the plants won’t be needed after 2025 as wind and solar costs decline and electricity from the reactors becomes increasingly expensive. Diablo Canyon is California’s only operating nuclear power plant. Edison International shut its San Onofre plant north of San Diego after a leak three years ago. Critics of the plant also said that newly discovered faults near Diablo made it a dangerous facility.
“This is not just the end of the nuclear era in California, it’s the end of the nuclear era in America,” said Mark Cooper of the Institute for Energy and the Environment at the Vermont Law School, who was quoted by the Orange County Register.
On the weed again? Country music legend Willie Nelson is looking to hire five people for his Colorado legal marijuana company, Willie’s Reserve. The jobs, with salaries as high as $65,000, are production manager, extractor, compliance officer, bookkeeper and sales director and will be based in Denver. The company is looking for people who have at least two years’ experience in the cannabis industry. It plans to launch its products this summer. Do you qualify?
Feel free to comment on these or any other matters below.
The Money and Markets Team