This week, new evidence emerged suggesting that the economy may deteriorate further before it improves. Naturally, this is not the outcome we desire, as life rarely aligns with our hopes.
This latest perspective comes from small business owners, who are crucial to the economy’s vitality. Therefore, when these entrepreneurs share their outlook on future conditions, we pay close attention—even if their insights are unsettling.
Recent data from the National Federation of Independent Business’s Optimism Index reveals that small business optimism has declined from 93.9 to 91.6. This drop primarily stems from a drastic decrease in hiring plans and expectations regarding future business conditions. Notably, seven out of the ten components of the Index have turned negative, resulting in an overall decline of 27 percentage points.
“Small employers aren’t deceived by headlines flaunting record-high stock market indices; they confront the daily realities of excessive regulation, rising taxes, sluggish sales, and a government lacking direction or a coherent plan for the future,” said NFIB chief economist Bill Dunkelberg. He added, “The average value of the Index since the recovery commenced is 91—8 points below the thirty-five-year average leading up to 2007, and significantly lower than typical readings during recovery periods.”
This bleak outlook for small businesses raises the possibility that we are not experiencing an actual recovery. The reality is particularly evident to those who must meet payroll obligations every two weeks. A striking finding from the survey indicates that 68 percent of business owners believe that now is a poor time to expand.
The Greatest Backdoor Wall Street Bailout of All Time
Another significant observation by Dunkelberg is that small employers are not fooled by the cheerleading in the media about high stock market indices. Despite this optimism, soaring stock prices don’t equate to a recovery. Instead, they reflect a distortion caused by the Federal Reserve’s reckless monetary policies.
Previously, no government banking official was willing to acknowledge the destructive and imbalanced nature of the Fed’s quantitative easing strategies. This critique has typically come from outsiders and skeptics. However, this has begun to change.
On Monday, Andrew Huszar, a former Federal Reserve official responsible for executing the initial $1.25 trillion of QE, apologized to Americans for his role in the program. Yes, you read that correctly.
“I can only say: I’m sorry, America. As a former Federal Reserve official, I was involved in executing the key program of the Fed’s initial venture into quantitative easing. The central bank maintains that QE is beneficial to Main Street. However, I’ve come to see the program for what it truly is: the greatest backdoor Wall Street bailout of all time.”
Indeed, according to the very individual who oversaw the program, this is “the greatest backdoor Wall Street bailout of all time.” Huszar goes further to comment on the implications for free markets in America.
“Where do we stand today? The Fed continues to purchase approximately $85 billion in bonds each month, consistently postponing any thought of tapering QE. Over the past five years, its bond acquisitions have surpassed $4 trillion. In what is supposed to be a free-market society, QE has turned into the largest intervention by any government in financial markets globally.”
Where Does the Money Come From?
At Economic Prism, we’ve been discussing this issue for so long that it feels like we’ve developed writer’s cramp. Nevertheless, we remain astonished by the mechanics and sheer absurdity of U.S. and global monetary policy, compelling us to continue. Yet, there’s one significant question that lingers unaddressed…
Where does the money originate? Unfortunately, the answer is so alarming that even an honest individual might choke on their morning coffee, and a credit card fraudster would turn red.
The Fed simply makes an entry in its ledger and—voilà—money materializes to buy Treasuries and mortgages.
Just a few years ago, before 2008, such actions would have seemed unthinkable—complete insanity. But that was prior to the Federal Reserve acquiring $4 trillion worth of questionable financial assets. And for what purpose?
To fill Wall Street’s coffers after they took substantial risks on mortgage-backed securities. The moral hazard being cultivated is indeed significant.
Sincerely,
MN Gordon
for Economic Prism
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