Commentary that supports Chris' contention of growing disparity between things real and tertiary (paper)

Jim H
By Jim H on Thu, Apr 30, 2015 - 9:33am

Here is a fresh piece of commentary from David Stockman that explains in clear terms how the FED, through QE, has further distorted the relationship between what is real, and that which is paper;

That is to say, growth on the asset side of the Fed’s balance sheet involves the acquisition of financial claims that arise from the utilization of real labor and capital resources. This happens, for example, when the Fed buys treasury notes that were issued to fund the purchase of concrete and bulldozer operators under the highway program or when new homes embodying carpenters’ wages and lumber are financed with Fannie Mae guaranteed mortgages purchased by the Fed.

That contrasts with the liability side of the Fed’s balance sheet, which expands dollar for dollar with the asset side, but represents nothing more than bottled monetary air confected from its digital printing press. Stated differently, the Fed’s fundamental tool of open market purchases of public debt and other securities, and thereby the expansion of its balance sheet, embodies the exchange of claims based on something for credits made from nothing.

The whole piece is worth a look for those attempting to better understand Chris' perspective on primary, secondary, and tertiary assets, and other truths behind the fake economy that is presented to us via Gov't statistics. 

Login or Register to post comments