Understanding the Danger

warning-843608_960_720Janet Yellen is more of an accountant and politician than an economist. This is true of all open market committee members. The Federal Reserve is charged with carrying out a political agenda. This will become apparent as events unfold.

Do not think that quantitative easing has had no effect on GDP. It has made slight economic growth possible through the wealth effect. With stock prices artificially elevated, the super rich have had the equivalent of found money to spend. The stock market is all that has been driving the economy. When the stock market crashes, the economy will suddenly be back to 2008 Great Recession levels. There is no way to tell how bad the economy will get. The decline in 2008-2009 left unfinished business. At very best the economy will reach that level and then decline some more.

Very simply, when the stock market crashes, the damage will rumble, not trickle, in to the economy as a whole.  The depression will be devastating but the country can survive that.  The country cannot survive a new round of government solutions for the economy.

 

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