First Fire Sebelius, Now (Forcibly) Retire Who Else?

Posted: Apr 18, 2014 12:01 AM
First Fire Sebelius, Now (Forcibly) Retire Who Else?

Well I can say this much for Janet Yellen, she sure learned how to jawbone the market, a skill that was notably lacking in her predecessor Ben Bernancke.

On Wednesday the market gapped open, only to follow a recent pattern of the gap gains eroding. But then Janet stepped in.

In a speech to the Economic club of New York, Yellen acknowledged that while the economy has made some strides towards recovery the jobs market is at least, if not more than, two years away from healing.

That means that stock market types, whatever else may be happening on Main Street, can count on cheap money for Wall Street a lot longer than they had anticipated.

And a wonderful rally began to take shape.

So I'm wondering why the markets just don't trot Calamity Janet out every day at 10:32 AM Eastern time, so that she can add her vocal support to the voodoo the Fed do so well-- not including of course, those five or six or seven times that the market crashes and panics ensue.

And there's the rub, I guess.

For a half a minute or more I thought perhaps I had the key to all of us retiring with $7 billion IRA portfolio, so we could all have our own bed-and-breakfast, or surf in Maui, or do all the others self-indulgent things that Boomers want to do.

Don't get me wrong: I'm all for a well-deserved retirement. If you're a Washington politician or bureaucrat, in fact, I'd be all for you retiring now, regardless of age. If firing Sebelius improved Obamacare, I have a whole bunch of additional suggestions on improving the government.

But how about the working folks who are retired now? What about their plight?

The charts below will give you some indication of what I’m taking about:

What’s wrong with this picture?

^SPX Chart

^SPX data by YCharts

Everything seems wonderful, until we enter those years of extraordinarily low interest rates from about 1995 on. And since nobody else is talking about this, I might just point out that perhaps the rapid acceleration in the upward movement of the stock market, followed by substantial depressions in stock market prices noticed on the right side of these charts, might have correlation to cheap money.

But of course liberals on both sides of the aisle believe, or would have you believe, that the major cause of these phenomena is there are more bad people in the world than there used to be; greed is out of control.

I would posit, however, that if all of the banking laws that have been passed since the turn-of-the-century were aimed at solving this problem of asset inflation, which from time to time is followed by rapid deflation --causing more bad laws to be passed-- then perhaps it's time to rethink whether those banking laws have succeeded.

Of course I say they haven't succeeded, but then I never believed they were passed to help ensure orderly markets in anything other than pork barrel spending.

In fact, it is exactly the policies that decouple the results on Main Street from the results on Wall Street that are the cause of our ills.

Cheap money as a result of artificially low interest rates have brought us a record worldwide money supply that has seen inflation practically everything.

Our friends over at Against Crony Capitalism provide us with a clue as to who is responsible.

Read more at Against Crony

Ironically, the folks at the Federal Reserve still maintain that the biggest problem we have in our economy is a lack of inflation. And as the charts above show, they couldn't be more wrong.

The expansion of the money supply via the Federal Reserve has done more to fuel inflation than any single historical fact, and all you need to have is the eyes to see it.

When you combine the record money supply with low interest rates you produce the effect of making stocks more attractive than other types of investments, in addition to inflation in consumer goods.

But as we can also see with our own eyes from the charts above, a period of asset inflation is inevitably followed by rapid deflation in assets, without corresponding relief for consumers.

And the effect has been that if you're one of those people who had to retire between, say, the year 2000 and, say, the year 2013, you've been forced to take more risk for less return than any time in history, even as the value of your money erodes.

The Federal Reserve Bank was established to prevent those types of bubbles and crashes.

Good going guys. You couldn't even get that part right.

Chalk up another stunning victory to a bureaucracy overseen by our federal government.