Millionaires are actually doing quite well for themselves and are completely out-of-touch with workers. Cheap money enriches those closest to it, and this “recovery” is proof. Let’s follow the money:
- The Federal government is the closest to the printing press, and it is performing better than any other entity. The Fed is printing cash to finance the Feds at record low rates while it simultaneously runs record high deficits.
- TBTF banks are the next in line at Ben’s cafeteria, and they are the beneficiaries of the Fed’s largesse in numerous ways. Their financing costs are low due to financial repression and the implicit TBTF guarantee from the government. Furthermore, the Fed has been purchasing their holdings of treasuries and MBS raising prices to ensure profits and gains in their investment portfolios.
- Corporations get their money from the TBTF banks who are busy underwriting a record amount of bond deals. The corporations are also using the cheap money to buy back shares and raise dividends, but not to expand much to the chagrin of the American worker.
- The rich derive their wealth primarily from their investment and real estate holdings, so they are doing very well, too. Cheap money has inflated asset prices, and they are the main beneficiaries of the cash as it trickles down from the corporations.
- Meanwhile, the middle class is earning 8% less than it did in 2007:
Remember, money printing does little to improve the labor market, but it does manage to significantly improve the lots of the feds, banksters, corporatists and the rich. The Fed equitably distributes the benefits and burdens of the program: the well-off get the money, and the rest of us will get the bill at some future date.
There has been a steady rise in durable goods orders since the “end” of the recession, but it appears that the rise is over. Since the last quarter of 2011, durable goods sales have become stuck in a pretty tight range save for one outlier each to the upside and downside, as indicated by the red lines. While these numbers aren’t awful, they aren’t great either. Just like the rest of the economy, future performance in this sector will be meh.
The mainstream media is characterizing the latest blip upward in new home sales as a “rebound.” The real story lies within the chart where it become obvious that a mere blip will not suffice; new home sales are running at or near troughs from the early 80’s and the early 90’s and stand at less than a third of the pace achieved during Housing Bubble 1.0. Since the printing press has already been deployed, the only thing that will increase sales is rising consumer incomes. Based on the current job creation pace, a healthy labor market is not in the country’s immediate future.
Germany and the rich countries will never agree to easing austerity or creating a central budget authority because they will never become joint and severally liable for periphery debts whether they be sovereign or from the financial system. Germany’s budget situation is under control, while the same cannot be said for France, Italy and Spain, where deficits have risen in lockstep since the GFC:
The rich countries know that any easing of the current program will allow deficits to rise even faster.