The DOW managed a modest increase yesterday, but overall, stock prices are on a downward trend. Oil prices are also dropping, along with gold. This scenario likely pleases the Federal Reserve, as it provides justification for additional money printing.
Decreasing oil prices help disguise the impact of the Fed’s monetary inflation. In a similar manner, falling gold prices enable the Fed to disregard critiques from those who invested in gold as a hedge against inflation. Concurrently, declining stock prices amplify demands from Wall Street for the Fed to take action.
But what drives the Fed to print more money?
Primarily, the Fed is inclined to print more money because it has an affinity for providing the world with an abundance of cheap currency. Additionally, their Keynesian principles compel them to believe that increasing the money supply will stimulate spending, which they assert will resolve various economic issues. Their theory holds that more consumer spending will lead to an economic boom, resulting in job creation, and ultimately, shared prosperity.
Is an Economic Deluge Nigh?
By David Galland, Casey Research
History teaches a clear lesson: the less constrained an economy is, the more effectively humanity can navigate challenges and seize opportunities. This natural flow facilitates quicker resolutions to mistakes and ensures ongoing progress.
Conversely, an economy bogged down by regulations, taxes, and bureaucratic interference impedes human instincts, stalling progress.
It is often said that while history doesn’t repeat itself, it frequently rhymes. Today, it seems that time has obscured the crucial link between the freedom to pursue individual aspirations and economic advancement.
This gap in understanding is evident in the prevailing demand for even more bureaucratic involvement in economic matters. If this trend continues—and I confidently contend that it will—the ambitions of productive individuals will be stifled by increasing taxes and efforts to “level the playing field.” As a result, the already fragile global economy may face further decline.
What a week it’s been! On Tuesday, the DOW closed at 13,279, its highest level since December 2007. This marks a significant milestone as we’ve crossed a pivotal point—December 2007, remember, was before the financial crisis unfolded.
It was almost a year prior to Lehman Brothers disappearing, leading to an avalanche of unforeseen financial calamities. In late 2008, we saw movements in financial statistics that were supposed to be impossible—yet they became our daily reality.
The Reserve Primary Fund did the seemingly unthinkable, “breaking the buck” by falling to $0.97 per share. While the stock market may have returned to December 2007 levels, the world around us has changed dramatically.
For instance, back then, a 10-year Treasury Note yielded 4.23 percent; today, that yield is less than half. Furthermore, December 2007 was before an array of financial rescue measures, including TARP and QE, were introduced to inflate financial markets.
According to the Commerce Department, the U.S. economy experienced a growth rate of 2.2 percent in the first quarter. However, something feels off about this figure. What is it that seems surprising?
The analysts at PIMCO have been predicting a new normal of low growth and low returns since 2009. Does 2.2 percent GDP align with their outlook?
Perhaps, but it raises the question of whether 2.2 percent truly reflects real growth. At the Economic Prism, we are more concerned with what this number might be concealing.
In reality, a 2.2 percent GDP figure may not signify growth but rather a stagnation. In fact, our rough estimates suggest that the economy could be contracting at an annual rate between negative 0.5 percent and negative 8.1 percent. The variance in this estimation indicates the discrepancies in CPI reporting.
This brings us to an important contemplation about the state of the economy and what these figures signify.
In this revised version, the article has been refined and structured for clarity and flow while maintaining the original HTML format. An introduction and conclusion could provide additional context, helping to frame the discussion about economic trends and concerns.
