I'm not sure how many followed Powell's testimoney today before congress. I think he has another session tomorrow with somebody different. Any way I get a bit mixed up if he is just before a mic or before a congressional hearing. And I must admit I did not read his entire speech. So: This is complete guess work on my part
Given that Powell has implied int rates will stay low untill at least 2022.
This makes me wonder if he becomes a target for those who accuse him of fostering more wealth inequality
The Fed by way of the treasury which seem to be joined at the hip these days are buying a mix of assets or debts of large and not so large corp listed on the stk exchange. Given some have access to very cheap money, it does seems to be true that wealth inequality is becoming ever wider
Now you and I don't have access to cheap money [although our revolving loans at 2.9 % would seem like low int until compared with 0.25%] so only a few who can afford to buy stks, will reap the reward with an honest purchase of stks with savings. On the other hand, cheap money/QE and any number of methods to keep the ponzi system going, fuels stk prices, so long as the Powell "put" remains effective. No matter how it happens the wealth inequality continues to grow and I am not expert enough to tell you how it happens but a tiny fraction own more wealth than 90% of the rest of us.
So??? Does Powell do anything about wealth inequality or not?? We have not seen unemployment numbers this high for a long time. Will the unemployed become another sector who decides that the system is not working for them. Are their numbers great enough to demand some thing extra in their pocket???
After all I have posted this is what I think will be the bottom line
Congress will instruct Powell to do another stimulus package of direct deposits into bank accts to stop the noise coming from the unemployed
I am not saying the Fed actions of any kind are correct or not, what the deficit might be, just that digital money will become the new normal, to be used to keep the unemployed and other entities well supplied with money and some what satisfied with food on the table, state and local bills paid while a few become even more wealthy
I could talk about all this money simply leading us down a rabbit hole, but I will stop with the prediction that the Fed does unlimited QE until when, I have no idea.
I will also close with just one little tid bit
The Fed can not print increased productivity, jobs or anything that will lead us out of recession
The Fed can print more debt
I have always been for balancing the budget, thinking that the massive debt will be an increasing burden on the US.
At this point, it seems like all the previous rules don't apply any more. I still think that we will pay a hefty price down the road for these actions to stimulate the economy, when added to the already excessive debt burden.
Bush had a chance to pay down the debt, early in his reign but instead gave us tax rebates with the money.
We know for sure that the current situation must be turned around because tax revenues are not close to paying for costs. If it didn't matter, then why not just keep printing massive money for people to buy stuff to keep the economy running.
Maybe we already went beyond a damage threshold but nobody knows it yet because it will take numerous months to see why it messed things up.
It's good though that the economy is opening up and recovering faster than expected. Trump is going to juice things up as much as possible before November to get elected, even if its bad news down the road from paying the price of many trillions more in spending than in tax revenues added to the already massive debt.
I really think that there is going to be a huge train wreck within several years.
Job automation is going to eliminate many tens of millions of jobs in this country during the next decade.
The unemployment rate could soar higher and tax revenues drop. Along with a stratospheric debt load, this is the recipe for a bad situation.
We might money print our way out now short term and still have most of the jobs come back but some will be very slow to come back and some will never return.
The economy will still limp along until we get most of the WORLD population inoculated with the COVID vaccine and can turn it up full throttle.
The US CANNOT maximize productively until the rest of the planet is strongly recovering too. China right now, is having new outbreaks and the highest in months.
There is also something called the law of diminishing returns and I believe that we've already passed that point for jobs and new job creation.
As automation ramps up, the unemployment rate will also go up.
