Cash is Not A Convenient Store of Value – Janet Yellen

Cash Is Not a Convenient Store Of Value.

As bad economic news continues to roll in, the Fed publically remains undaunted and insists rate hikes are on the horizon.

Distortions created by quantitative easing are apparent and worsening.

The few bits of good economic news are met with media exclamations of “robust!” and “solid”

Poor economics news is generally “unexpected” or dismissed as a function of the weather.

The Fed remains as clueless as ever as evidenced by Janet Yellen’s statement that “cash is not a convenient store of value.”

Podcast Summary

Intro 0:00-3:43

Rising Home Values vs. Wage Growth

3:43-10:20 Spending, wage growth and savings rates are discussed. Demand has been brought forward via quantitative easing (QE) and zero interest rates. Consumers are tapped out and have increased expenses in the form of higher student loan payments, food and health care insurance costs, making home unfordable, while home prices rise! There’s no money left to buy houses as home values are up 17% and wages just 1.3% the past two years, leaving millennials out of the home buying club.

In The Dark Side of Rising Home Prices Smaulgld refutes the concept that rising home prices and higher stock prices are good for the economy.

If home sales have been tepid with zero interest rates, how will they do with higher rates? Stimulus and QE under Keynsiansm are temporary measures, not six year programs. Once such programs become fixtures they are hard to unwind and require doubling down or going to negative interest rates.

“Cash is not a convenient store of Value”- Janet Yellen

Discussion of Janet Yellen’s recent statement that cash is not a convenient store of value. Discussion of the inability of monetary policy to solve economic issues created by monetary policy.

Will the Fed raise interest rates?

10:20-14:10 discussion of the Fed’s threat to raise rates and the state of the housing market.

First Quarter GDP Projections

14:10-15:38 the Atlanta Fed Now and other first quarter GDP projections are discussed. Lower oil prices acting as a “tax cut” has not worked out. Consumers are not spending the difference saved from lower gas prices and there are job cuts in the shale oil industry as a result. Fewer people working means fewer people producing and fewer people with money to spend. A real tax cut stimulates consumer and business spending, QE stimulates the banks. Lower gas prices have been offset by higher consumer costs elsewhere. Lower oil prices are turning out to be A Black Swan Covered in Cheap Oil.

The Impact of a Fed Rate Rise on Emerging Markets,the Dollar and Gold

15:38-27:35 A rate increase would create chaos as the dollar would get stronger and cause the Fed to have to reverse course sending gold higher and the dollar lower. This would create massive volatility. The consumer saving rate is discussed in the context of increased consumer expenses.

2016 Presidential Election and Janet Yellen

27:35-30:20 Discussion of the 2016 presidential election and the impact that the Fed and the economy will have on it. The oil lobby vs. Obama is discussed. Fed Chair Janet Yellen’s reappointment is discussed and her curious call to raise interest rates when she has stated in the past she is in favor of negative interest rates.

Pushing the U.S. Debt Issue Aside

30:20-31:50 Discussion of the strength of the dollar in the context of the massive debts and unfunded liabilities that the U.S. continues to incur. There had been a lot of talk about this issue until the stock market started rising and gold fell. The issue has gone away as the Fed has stopped QE and has started talking about raising rates. The Fed really hasn’t stopped QE as they are still rolling over the principal on all the bonds they bought during the first three QE programs and they have only talked about raising rates.

Fed Manipulation of the Media

31:50-38:58 Discussion of how the Fed reacts to the media and helps manipulate the story in their favor such that they don’t become the object of ridicule but rather as prudent stewards of the economy. Ron Paul’s interrogation of Ben Bernanke is discussed. Ben Bernanke’s new blog is discussed. The economy is decelerating as the Fed is talking about raising rates. The Fed is masterful at creating false narrative and biding time. Obama care expenses and utility expenses are included in GDP and the GDP is still unimpressive despite big increases in those expenses.

Where Does the Money Come From to Support the Warfare Welfare State?

38:58-43:10 Discussion of the U.S. rising expenses to pay for wars and welfare while the productive capacity of the U.S. is not increasing as fast. Indeed, the US GDP over the past few years has increased less in nominal terms than the amount of money printed during the three QE programs. Discussion of the difference between Chinese communism and U.S capitalism. China provides no social safety net! Discussion of the value of a college education.

Indiana’s Religious Freedom Law

43:10-46:50 Indiana’s religious freedom law is discussed. Is there a private right to discriminate? Starbucks Race Together initiative is discussed. The media tries to distract you from your own financial and social issues by injecting other issues and insisting that you must pay attention to them.

Media Focus on “National” and Global issues

46:50 discussion how the media characterizes issues that Americans should be concerned about i.e. Ukraine, Yemen (where we have “interests”). Many of these issues never directly impact any of the audience’s lives. Yet people whose lives are not impacted take to social media to discuss these issue. Perhaps its best to ignore these issues and create your own narrative regarding things that impact you and talk about that.

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