logo
g Text Version
Beauty & Self
Books & Music
Career
Computers
Education
Family
Food & Wine
Health & Fitness
Hobbies & Crafts
Home & Garden
Money
News & Politics
Relationships
Religion & Spirituality
Sports
Travel & Culture
TV & Movies

dailyclick
Bored? Games!
Nutrition
Postcards
Take a Quiz
Rate My Photo

new
Houseplants
Romance Movies
Creativity
Family Travel
Southwest USA
Irish Culture
Home Finance


dailyclick
All times in EST

Full Schedule
g
g Investing Site

BellaOnline's Investing Editor

g

The Fed and Wall Street

Guest Author - Tony Daltorio

How appropriate that in advance of the Labor Day holiday the party on Wall Street came to an abrupt end.

The reason? Jobs...or rather the lack of jobs. The August employment data, released on Friday, showed a continued lack of job creation in the US economy.

Wall Street was surprised by this as the dummies there cannot grasp the concept that the policies of the Federal Reserve are not working.

The reason for this lack of a grasp of the obvious is that all of the monies printed by the Federal Reserve have gone to only one place – Wall Street.

According to Bloomberg, during the financial crisis, Wall Street received $1.2 trillion in “loans” from the Federal Reserve to keep the big banks going.

In addition, the Fed had its QE1 and QE2 programs which gave in excess of another $2 trillion to Wall Street via purchase of Treasury and mortgage securities.

With more $3 trillion received directly from the Federal Reserve, no wonder Wall Street has enjoyed such a party since March 2009!

But what the party goers on Wall Street have ignored is the fact that they have received all of the Fed's largess. Main Street got nothing and conditions continue to worsen there.

Recently, Fed chairman Ben Bernanke hinted very strongly that sometime before the end of the year, possibly as early as later this month, the Fed would initiate QE3. It would likely be in the amount of half a trillion to $1 trillion and you guessed it – the monies would go to Wall Street again.

That is why until Friday Wall Street was in party mode again.

So why does the Fed keep using a policy that does not work?

Simple. As explained in a prior article, the Fed is not an independent agency as it is portrayed. It is literally owned 100% by the banks and its main purpose is to see that the banking industry remains healthy.

A second reason is the short-term mentality which now permeates Wall Street. Most of its denizens could care less about anything longer term than three months...only short term profits matter.

Think of two scenarios.....

In the first scenario, the economy and especially Wall Street would suffer through a terrible two years. But afterwards, all would be well and what would follow was the biggest boom in history.

In the second scenario, Wall Street would have a terrific year. But afterwards, it and the US economy would enter a period of many years that would make the Great Depression look like a picnic.

If forced to make a choice, I think most people would choose the first. I know I would.

But if this question was asked of people on Wall Street, my 30 years of experience tells me that today 99.9% of them would choose the second - "let's enjoy the party and not worry about a year from now".

Until this psychology changes, the "Great Recession" in the United States will continue to linger.
Add The+Fed+and+Wall+Street to Twitter Add The+Fed+and+Wall+Street to Facebook Add The+Fed+and+Wall+Street to MySpace Add The+Fed+and+Wall+Street to Del.icio.us Digg The+Fed+and+Wall+Street Add The+Fed+and+Wall+Street to Yahoo My Web Add The+Fed+and+Wall+Street to Google Bookmarks Add The+Fed+and+Wall+Street to Stumbleupon Add The+Fed+and+Wall+Street to Reddit



 



RSS | Related Articles | Editor's Picks Articles | Top Ten Articles | Previous Features | Site Map




For FREE email updates, subscribe to the Investing Newsletter


Past Issues


print
Printer Friendly
bookmark
Bookmark
tell friend
Tell a Friend
forum
Forum
email
Email Editor


Content copyright © 2014 by Tony Daltorio. All rights reserved.
This content was written by Tony Daltorio. If you wish to use this content in any manner, you need written permission. Contact Sandra Baublitz for details.

g


g features
Learn from Investing Mistakes

Your Assets and Liabilities

Retire Early Book Review

Archives | Site Map

forum
Forum
email
Contact

Past Issues
memberscenter


vote
Poetry
Daily
Weekly
Monthly
Less than Monthly



BellaOnline on Facebook
g


| About BellaOnline | Privacy Policy | Advertising | Become an Editor |
Website copyright © 2014 Minerva WebWorks LLC. All rights reserved.


BellaOnline Editor