The Federal Reserve & It’s Ongoing Destruction Of The Bottom 90%

The Federal Reserve seemingly is an ongoing mission to destroy the bottom 90%.

  • Lance Roberts

The one lesson that we have clearly learned since the 2008 “Great Financial Crisis,” is that monetary and fiscal policy interventions do not lead to increased levels of economic wealth or prosperity. What these programs have done, is act as a wealth transfer system from the bottom 90% to the top 10%.

While we will address the statistical data, there is also the anecdotal evidence which supports this thesis. Since 2008 there have been rising calls for socialistic policies such as universal basic incomes, increased social welfare, and even a two-time candidate for President who was a self-admitted socialist. Such things would not occur if “prosperity” was flourishing within the economy. 

As I addressed recently:

“The disparity between the Fed’s interventions, the stock market, and the real economy has become abundantly clear. For 90% of Americans, there has not been, nor will there be, any economic recovery.”

Federal Reserve, The Federal Reserve & It’s Ongoing Destruction Of The Bottom 90%

Stocks Are Not The Economy

Take a close look at the chart above.

Companies derive their revenue from the consumption of goods, products, and services they produce. There, it is logical stock price appreciation, over the long-term, has roughly equated to economic growth. However, that relationship has become unhinged since the financial crisis due to the Fed’s interventions and suppressed interest rates.

From Jan 1st, 2009 through the end of March, the stock market has risen by an astounding 159%, or roughly 14% annualized. With such a large gain in the financial markets, there should be a commensurate growth rate in the economy. 

After 3-massive Federal Reserve driven “Quantitative Easing” programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which totaled more than $33 Trillion, cumulative real economic growth was just 5.48%.

While monetary interventions are supposed to be supporting economic growth through increases in consumer confidence, the outcome has been quite different.

Low, to zero, interest rates have incentivized non-productive debt, and exacerbated the wealth gap. The massive increases in debt has actually harmed growth by diverting consumptive spending to debt service. …

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