Fed says sorry to America. I can only say: I’m sorry, America. As a former Federal Reserve official, Andrew Huszar, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time. This is an amazing admission of a Fed official in a recent Wall Street Journal Oped.
Andrew Huszar, a senior fellow at Rutgers Business School, is a former Morgan Stanley managing director. In 2009-10, he managed the Federal Reserve’s $1.25 trillion agency mortgage-backed security purchase program. He goes on to say, “Unless you’re Wall Street. Having racked up hundreds of billions of dollars in opaque Fed subsidies (food stamps for bankers), U.S. banks have seen their collective stock price triple since March 2009. The biggest ones have only become more of a cartel: 0.2% of them now control more than 70% of the U.S. bank assets.” “Let’s be honest, 50 percent of Americans don’t own stock,” he said. “There’s a certain amount of trickle-down monetary policy involved here. And there’s a real question as to whether that works compared to the huge costs that the program has.” Making these admissions, that most of us had already known, will not help his banking career – careful Andrew.
The key admission is that the Fed is engaging in “trickle down” economics. This has been the main rationale of the Fed, but leverage is the enemy of the poor and middle class – something I have wrote about consistently, click here. Simply put, poor and middle class can not leverage to the same extent as the rich and hence the key reason of wealth inequality. The rich, and their wannabe participating friends, like to blame minorities, immigrants, government dependency on entitlement programes and a general laziness of people as the reason, but wealth inequality is just the simple mathematical formula enshrined in undemocratic central bank policies. A willful injustice on the peoples of the world living under such a regime.
That being said, we cannot as traders whine about political policies, rather deal with them in our day to day trading. For the real change, as Andrew said, we will need to wait for the next crisis, which will surely come. We know the rich will not give up power easily, so the gravy train will continue until all is cannibalized. For sure there maybe a little taper here or there, to satisfy certain politicians and will spook the markets, but QE infinity will continue until the next crisis. So equities up, bonds flat, Dollar flat (relative to other currencies, as other central banks are doing the same thing), while unreported inflation quietly occurs to monetize the huge debt created. The latter at some point in time, will create a big bull run in commodities. But of course timing is everything.
Blue Point Trading, William Thompson