Forum Post: The economy sucks not in spite of the FED pumping money into WallSt but because the FED is pumping money into WallSt
Posted 2 years ago on Aug. 18, 2012, 4:53 p.m. EST by richardkentgates
This content is user submitted and not an official statement
One of the themes I push, not so much on my blog but on social media, is that it really matters who controls the conversation. This is implied in the complaints about our government being bought. It means that our politicians are listening only to those who can purchase time to be heard. I am now going to present to you a very big reason that the working class and especially the poor, should be controlling the conversation at this point.
The well to do crowd has had their say and as Wall Street indicates, they are doing better than ever. Yet, at the same time unemployment is up, employment down, prices are up except for housing. Housing is down because of the high foreclosure rate and is not being dictated by the rest of the economy for now. So how can this be true at the same time? Poor employment numbers but record profits on Wall Street. Well, first I'll share this graph and explain it on the other side.
The price index is an indicator of inflation. Inflation is when prices rise and the value of the dollar falls respectively. What the FED has been doing through programs like operation Twist and Quantitative Easing, is pumping money into the system. Whenever you have a surplus of currency you cause inflation and since the money is just sitting with the banks and not circulation, inflation rises. Now CNBC opinion makers and other financial propagandists have been "fearing" inflation due to this money pumping. They either know this is crap or they are ill equipped for their careers, I'll let you decide.
The reason inflation is not actually a fear is because the pumping of money is actually fighting off deflation. This is something the FED and The Hill fear more than anything. Why? Because it destroys wealth. Make no mistake, I am in no way saying it destroys the economy. Quite contrary actually because it only destroys wealth, depending on what economic class you are in. Deflation would cause the value of the dollar to rise and prices to fall.
What does deflation mean for the lower end of the 99%? It means more purchasing power. Deflation is like getting a raise without actually changing the amount you make.
What does deflation mean for the middle and upper 99%? Well the picture isn't as rosy. This economic class would experience the same effect of getting a raise, but this is also the class of people more likely to own their home. As I have said the housing market is currently detached from the rest of the economy but that is only temporary and this class may see a decrease in home equity. This is questionable though because of the existing deflation that is still persistent in housing.
What does deflation mean for the 1%? This picture is really really bad. With lower prices, they would make a lot less profit.
Now you see, what our leaders call a cure for the economy, clearly depends on what class you're in. If you look at the graph one more time, see the dip? That is the market, the economy, self correcting. That dip hitting in 2009, if left alone and for us to go from there, would have been a balancing of the economy and a correction to the inequality in this country. Instead they could have used the money to write down the principle on mortgages and the only people who would have taken a hit would have been the 1%. But that isn't what happened. What happened was the FED and Washington made the decision to kick start inflation and fuck the lower class so the 1% could retain their wealth. Don't think for one second that Romney or Bush would do any different because Bush signed the first stimulus bill.
If the 99% don't learn to control the conversation, this will always be the case.