10-12-2012, 04:16 PM
Wanted to start a new thread on this topic. I dont want it to turn into a political discusion. So if someone comes on and starts to talk about politics or Race Ill just delete the whole thing.
I am becoming more and more concerned about the FED's over all priority as it relates to the economy. It appears to me that the only priority the FED has right now is to prop up the stock market. Their priority is based on what I think is mis-guided concept that the market will drive the ecconomy as ooposed to the other way around.
I think that the market today is being propped up by the FED's action as ooposed to the economy, which means that it is unsustainable in the long run. At the FED's defense, the theroy seems to be that they will prop up the market until the real economy catches up. My concern is that this is like welfare. Once the core economy becomes adicted to the influx of FED stimulas, it will never go back until it all comes crashing down.
Interest rates at an effective rate of zero, are doing nothing to stimulate the economy and are effectivly crushing the majority of the middle class retired fixed income people. The FED is sort of competing with retired people on who the banks go to for dollars. The concept that the Banks will lend more and at cheaper rates simply is not true. Credit card companies are charging record interest rates, and banks are giving out loans to businesses and people like they are holding the last dollar in the USA.
What the FED doesnt seem to realize is that our retired population is a potenial market driver. Today a retired persons income on 100k investment is something like $30 a month. If you have 1 million you might get $300 a month in interest. This pushes retired people to either invest in more risky stock market investments or to live off the principle and cut spending way down. So one of the largest consumer groups in this nation have been stunted to stop spending.
While this isnt a popular concept, Im begining to think the best move the FED could do is to stop QE3 and start to raise interest rates to a respectable level. The market would go down initially but then quickly become less volitile. The retired population would start to see income again and start to spend excess as ooposed to having to dip into invested principle.
I am becoming more and more concerned about the FED's over all priority as it relates to the economy. It appears to me that the only priority the FED has right now is to prop up the stock market. Their priority is based on what I think is mis-guided concept that the market will drive the ecconomy as ooposed to the other way around.
I think that the market today is being propped up by the FED's action as ooposed to the economy, which means that it is unsustainable in the long run. At the FED's defense, the theroy seems to be that they will prop up the market until the real economy catches up. My concern is that this is like welfare. Once the core economy becomes adicted to the influx of FED stimulas, it will never go back until it all comes crashing down.
Interest rates at an effective rate of zero, are doing nothing to stimulate the economy and are effectivly crushing the majority of the middle class retired fixed income people. The FED is sort of competing with retired people on who the banks go to for dollars. The concept that the Banks will lend more and at cheaper rates simply is not true. Credit card companies are charging record interest rates, and banks are giving out loans to businesses and people like they are holding the last dollar in the USA.
What the FED doesnt seem to realize is that our retired population is a potenial market driver. Today a retired persons income on 100k investment is something like $30 a month. If you have 1 million you might get $300 a month in interest. This pushes retired people to either invest in more risky stock market investments or to live off the principle and cut spending way down. So one of the largest consumer groups in this nation have been stunted to stop spending.
While this isnt a popular concept, Im begining to think the best move the FED could do is to stop QE3 and start to raise interest rates to a respectable level. The market would go down initially but then quickly become less volitile. The retired population would start to see income again and start to spend excess as ooposed to having to dip into invested principle.
Maul, the Bashing Shamie
"If you want to change the world, be that change."
--Gandhi
"If you want to change the world, be that change."
--Gandhi