Fed Report: Americans Are Hoarding Money

The Fed has a slew of excuses at the ready for the lack luster economy even though they have printed $4 trillion to try and boost it.

New St. Louis Fed Report Claims Americans are Hoarding Cash.

Podcast Summary

Excuses From the Fed for a Lackluster Economy Abound- not enough inflation, an aging population & people hoarding money

0:00-7:00 Introduction

The Job and Real Estate Markets

7:00 discussion of the recent non farm payroll report that showed only 148,000 new jobs. The labor participation rate is down to a new 36 year low which Janet Yellen blames on an aging/retiring work force.

This contradicts the Bureau of Labor Statistics data that shows that some of the best job growth has been for workers over 55, which means older people are not retiring and/or are re-entering the work force. Job losses are occurring in the 28-55 age bracket.

People can’t retire or are deferring retirement because there is no ability to earn interest on savings due to artificially low interest rates. People in their prime working years, in contrast, are having difficulty finding jobs.

The housing “recovery” has stalled and the Fed no longer talks about it as a driver of the economy.

There is no wage or job growth and therefore no home sales growth. The poor housing sales have nothing to do with lack of inventory. It’s lack of demand. Lower interest rates and lower credit standards won’t help the real estate market without job and wage growth.

Consumer credit and auto loans are easy to come by, putting consumers into debt and making them unattractive candidates for home mortgages.

The Federal Reserve

Fed: Americans are Hoarding Money

10:30-12:19 The St. Louis Fed published a paper saying the economy was weak, because Americans are hoarding money.

Translation- people aren’t taking out enough sub-prime credit as the Fed would like them to.

.@TonyPivetta @bonzaiblog @KevinKimmich Today's Fed says we're hoarding $s. Hope they'll confiscate $s & give us gold http://t.co/fQ4Zz5sfkY

— Smaulgld (@Smaulgld) September 7, 2014

The Fed prints trillions of dollars and gives it to the banks and wonders why we aren’t spending dollars we don’t have.

Minnesota Fed President Narayana Kocherlakova: We need more inflation and lower rates

“Interest rates are not low enough,” Minneapolis Federal Reserve President Narayana Kocherlakota said recently at a Town Hall meeting. “Given where we are with inflation, I think that it’s challenging to know why we are removing stimulus from the economy at the rate that we are.”

Perhaps, because six years of printing trillions of dollars and zero interest rates hasn’t helped?

Philadelphia Fed President Charles Plosser – Rates that are too low are a problem

HOWEVER:

“I am not suggesting that rates should necessarily be increased now,” said Plosser, adding “our first task is to change the language in a way that allows for liftoff sooner than many now anticipate and sooner than suggested by our current guidance.”

Job Report

12:19-17:40 Discussion of the jobs report which was dismissed by the economic cheerleaders. Discussion of why the report is acceptable to the Fed. They had been pushing the narrative that the poor job numbers earlier in the year were a result of bad weather.

The recent “good” job reports (which showed part time job growth and full time job losses) were touted as evidence that the Fed was correct in “tapering” QE because the economy was improving.

This bad jobs report give the Fed pause and an excuse to delay raising interest rates which it has been threatening to do.

The Fed wants to print money and keep rates low but they have to stop once in awhile. The Fed gains credibility by threatening to end QE and raise rates so that they can reignite QE again. The Fed has started and stopped QE a few times already.

17:40 -19:56 Discussion of the labor participation rate of the 70’s and today, including part-time work and women’s participation in the labor force.

Discussion of how the main stream media claims there is no inflation-ex. Henry Blogget on Yahoo! Finance

There is price inflation, even using the faulty CPI but not corresponding wage inflation.

Elimination of Prices from the Market Place

19:55-20:55 discussion of the cashless society and how it enables people to ignore the impact of inflation.

20:55-27:38 Credit Tip of the Week

Discussion of the elimination of medical collections from credit reports, which will probably lead to fewer people paying their medical bills and medical costs to continue to rise.

Discussion of the Russian Situation

Russia threatens to close airspace

27:38-34:00 Russia threatens to close airspace to EU planes. Seems the U.S. is antagonizing the Russia perhaps as a cover for failed economic policy.

Scottish Independence

ISIS or a vote for Scottish independence may also give the Fed an out if the economy takes a noticeable downturn.

Politicians do well when it seems they are solving problems (even if they created them), fighting a war or an economic crisis.

Roosevelt’s policies caused a second depression, yet he got reelected. Recovery is not a six year media event.

The amount of QE is greater than the nominal GDP growth during the period of time QE was in effect.

Real Estate

Using IRA’s To Buy Real Estate

34:00-51:52 discussion of the benefits of buying a home with a low fixed interest rate 30 year mortgage. Discussion of using and IRA to buy a home.

What Happens if the Stock Market Crashes

51:52- Discussion of the Fed’s options if the stock market crashes. Discussion of the reliance that people place on the Fed to centrally plan and “fix” the economy.

People listen to “authority” figures or believe what they see in print on CNBC even when their intellect, gut or logic tells them the authority figure/media is wrong.

The stock market is not a proxy for the health of the economy.

Interest rates are heading lower even though the Fed is stopping QE. However, the reason given for doing QE was to keep rates low. If rates are low without QE, then why the need to do QE in the first place?

Who is buying the bonds that the Fed is not buying in the same quantity and same high price?

It’s the same illogic of the bullion banks selling thousands of silver and gold contracts short in five minutes.

The Fed Has No Shortage of Excuses for a Lack of a Recovery