When Reality Meets the Fed

Goods Are Good, Services Stink: Chart Of The Day | ZeroHedge.

It seems that easy money is good for manufacturing, but its effects decrease when applied to the service sector.

Intuitively, this makes sense. You can put off that haircut for a week or two, but if your car is not running then you need to buy some parts or you can’t go to work.

Perhaps, Fed monetary policy is an anachronism. Even though it lifts manufacturing, it is not 1959 where the majority of people work in some sort of goods production. The lion’s share of the economy is the service industry.

Fed policy also lifts the stock market temporarily. Since Americans have been abandoning the stock market in droves since 2008, the temporary wealth effect reaches fewer and fewer families.

 

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