The split in the American elite and the fate of "free money"
Like a few years ago, the world is once again looking at the US Federal Reserve System with tension. Then, it is true, everyone was first interested in how the discount rate would fall, and then - whether it would increase. Today we are talking about the termination of emission programs QE3, it is also - ku-ku-ku. But before discussing the specific actions of specific individuals, a few words need to be said about why, and why stop the issue at all.Indeed, inflation, although it is higher than the official indicators (and who else is?), Nevertheless, seems to remain in more or less decent frames. Official indicators of the economy also show a positive trend - so why break a spear? But in fact, everything is much more complicated. First, the statistical data, if interpreted correctly, do not at all show an improvement in the situation, rather the opposite (see, for example, the latest review of the world economy by Sergey Egishyants).
Secondly, there is no certainty that equity money generally has a positive impact on the economy, or rather, on its real sector. Most of them immediately enter the speculative sector, which shows historical highs (such as the New York Stock Exchange) with, in general, far from outstanding indicators of the economy. In a sense, this is inflation - the growth of stock indicators against the backdrop of stagnation of their issuers. However, inflation is traditionally considered a negative indicator, and the stock exchange growth is positive, so no one is worried.
Thirdly, serious problems were formed when investing in the real sector. Demand is falling (and enterprises cannot be fooled by any official statistics), and banks are less and less willing to give money to enterprises - since at a low rate the return is delayed for many years, and against the background of a general recession there is no guarantee that the money will return at all. If banks would not have an alternative, this issue could still be somehow resolved, but when banks have the opportunity to receive "third-party" profits due to the redistribution of emission money - you have to be a fool to invest in the real sector. All attempts by the Fed to force banks to lend to enterprises and individuals, in general, were unsuccessful.
There is another reason. The fact is that the issue does not lead to high inflation, including because the structure of the money supply is changing. There is a replacement of credit money for cash, or, otherwise, a decrease in the credit (banking) multiplier, which decreased from the 2008 year more than three times, from 17 to 5. And this process continues. But it is impossible to lower the multiplier to unity, and this means that sooner or later, emissions will lead to an increase in inflation - and this is another reason why it is worth considering whether or not to reduce emissions altogether.
In this case, it is necessary to take into account another important circumstance. During the time of “Reaganomics” (and a bit slower this process started since 60), the share of the financial sector in the redistribution of the total profits created in the economy has grown significantly - to more than 50%. In other words, today successful enterprises are mainly financial structures (independent companies or divisions of other companies) that are most actively opposed to the termination of the issue. And their voice is heard much stronger than the voices of others - because they simply have substantially more money.
In such a situation, the Fed leadership must very carefully prepare the public to reduce rates. And since the head of this organization, Ben Bernanke, is in many respects bound by different political circumstances (which was well seen in his speeches at the beginning of summer, when he literally changed his mind on the opposite during the week), other leaders again come to the fore. So, Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, said the other day: “Employment growth turned out to be more noticeable than I expected. In particular, the current unemployment rate in the US economy is more than half a percentage point lower than me and my colleagues in the Cleveland Federal Reserve Bank predicted last September. In light of this improvement, in my opinion, it is likely that the Fed will go to reduce the monthly volume of asset purchases. Of course, provided that the trend towards improvement in the labor market continues. ”
The head of the Atlanta Federal Reserve Bank Dennis Lockhart does not lag behind her, according to whom the reduction of QE3 volumes may begin at one of the Fed Reserves meetings that have remained this year. Later, the head of the Federal Reserve Bank of Chicago, Charles Evans, did not rule out the beginning of the curtailment of the program in September. According to him, most likely, this will occur in several stages. On the eve and the head of the Federal Reserve Bank of Dallas, Richard Fisher noted that the Fed is close to the decision to slow QE3 after the publication of data on reducing unemployment to 7,4%.
We note, by the way, that the main argument is low unemployment. Since the US authorities are desperately falsifying relevant statistics, throwing out those who have been unable to find work for a long time (but don’t want to work at all!), Natural suspicion arises, this is a targeted campaign, the essence of which is not only to show the success of the actions of the monetary authorities, but also to support the political decision already taken to reduce emission programs. And then this is a demonstration of the fact that, firstly, the authorities understand that things are not going as well as it seemed before, and secondly, that there is a serious confrontation between the US administrative authority (and the Fed here acts in conjunction with the administration US President) and the financial elite, which the issue, for obvious reasons, is quite satisfied.
If this hypothesis is correct, then this is most likely the most interesting effect of continuing emissions. In fact, the free money that the Fed is pumping into the economy goes to different participants in the economic process quite unevenly, which causes a serious split in the elite. And this is a very interesting and important effect.
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