As I’ve been railing for years now, if you have any savings and are keeping it out of exposure to the phony propped-up Wall Street casino, you are being robbed. Even the Fed apologists at cnbc (CNBS).com appear to have noticed.

from Jeff Cox at

Since 2006, the S&P 500 stock market benchmark has surged more than 60 percent (and more than 200 percent if you count from the time the bull market began in 2009). In the same period, however, folks squirreling away their money in savings accounts have lost nearly $8 billion.

Both results are due in large part to a Fed policy that has sought to push money out of zero-yielding savings and money market accounts and into riskier assets, particularly stocks. (Households have about $8.4 trillion in time and savings deposits, along with another $1.05 trillion in money market funds, according to Fed data.) The goal is to create a “wealth effect” that spreads through the economy, though economic growth throughout the post-financial crisis recovery has been mired in the 2 to 2.5 percent range (these numbers are even suspect)……

NerdWallet took those rates, then applied them to average disposable personal incomes and used as a baseline a $25,000 high-yielding account to figure how much savers have lost in the periods. All totaled, the site figures savers have lost about $7.7 billion during the decade…..

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Now imagine having $150,000 sitting in a money market account!@#$%

After 6 Years Of QE, And A $4.5 Trillion Balance Sheet, St. Louis Fed Admits QE Was A Mistake

…..So in sum, the vice President of the St. Louis Fed has taken a look around and discovered that in fact, not only have trillions in asset purchases not worked when it comes to creating “healthy” inflation and boosting growth in the US, these asset purchases haven’t worked anywhere they’ve been tried. Furthermore, he’s noticed that central bankers that adhere, in a perpetual state of Einsteinian insanity, to the Taylor principle, will never be able to raise rates and finally, he thinks that the more the Fed talks, the more confused the public gets about what it is the central bank intends to do.

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Former Fed President: “We Injected Cocaine And Heroin Into The System To Create A Wealth Effect”

Just two months ago, former Fed President Dick Fisher admitted that “The Fed front-loaded an enormous market rally in order to create a wealth effect.” Today he is back, taking a victory lap onthe 7th anniversary of the crisis lows by explaining, rather stunningly, to CNBC that “we injected cocaine and heroin into the system” to enable a wealth effect (that he admits did not work, despite its success in raising asset prices), and “now we are maintaining it with ritalin.” Fisher also confirmed his previous warning that “The Fed is a giant weapon that has no ammunition left.”     ( …and the schills giggle)

Understanding Failed Policies: Wealth Effect, Wage Effect, Poverty Effect

by Charles Hugh-Smith of OfTwoMinds blog

Central banks’ attempts to boost borrowing, consumption and wages by inflating asset bubbles leads to the poverty effect, not the wealth effect.

Central bankers have been counting on “the wealth effect” to lift their economies out of the post-2009 global meltdown slump. The wealth effect concept is simple: flooding the economy with credit and zero-interest money boosts the value of assets such as housing, stocks and bonds. Those owning the assets feel wealthier, and thus more inclined to borrow and spend more money. This new spending creates more demand which then leads employers to hire more employees.
Unfortunately for the bottom 90% who don’t own enough stocks to feel any wealth effect, the central bankers got it wrong: wages don’t rise as a result of the wealth effect, they rise from an increased production of goods and services. Despite unprecedented money-printing, zero interest rates and vast credit expansion, real wages have declined.
The unintended consequence of inflating asset bubbles to drive an illusory wealth effect is that speculative bubbles inevitably pop, creating a pervasive poverty effect. The asset bubble creates phantom collateral that households borrow against. When the bubble pops, they’re left with the debt and debt payments (“the poverty effect”) while the ephemeral “wealth” has vanished.
….. A sustainable wealth effect results from the wage effect, as rising production of goods and services organically boosts wages. The Federal Reserve and other central banks have it backwards: inflating asset bubbles does not increase wages or create a sustainable wealth effect; increasing production of goods and services bolsters wages which then leads to a sustainable wealth effect.
Inflating serial bubbles as a means of boosting more borrowing and consumption only leads to the poverty effect: an erosion of wages’ purchasing power and the inevitable deflation of asset bubbles that leaves unpayable debt once the phantom collateral evaporates.
The Fed has been able to maintain price stability but not wage/purchasing power stability. That dooms its entire intervention project.

Simply put, central banks’ attempts to boost borrowing, consumption and wages by inflating asset bubbles leads to the poverty effect, not the wealth effect.


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