By David Stockman,
This is one for the record books. During Janet Yellen's last week in office, the Dow dropped by 1,095 points or 4.1%. But by her lights, apparently, that wasn't even a warning bell--- just the market clearing its collective throat.
So on the way out the door our Keynesian school marm could not resist delivering what will soon be seen as a grand self-indictment. There's nothing to worry about, she averred, because Wall Street's OK and main street is positively awesome:
I don't want to label what we're seeing as a bubble....(even if) asset valuations are generally elevated....(but) when I see the unemployment rate fall to 4.1%...I feel very good about the progress we've seen there.
No, there is a monumental bubble out there that was born, bred and nurtured at the hands of the Fed. At the same time, Yellen and her merry band of money printers had virtually nothing to do with the 4.1% unemployment rate---even if that were a valid measure of return to full employment prosperity, which it is not.
To the contrary, the mainstreet economy is sick as a dog, and it is the Fed's giant Wall Street bubbles which made it so. That said, hereupon follows the ringing economic and financial indictment that Janet Yellen so richly deserves.
In the first place, that Fed's dangerous digression into massive QE and 100 months of near-ZIRP had virtually nothing to do with the limpid "recovery" since the June 2009 bottom. And we do mean its contribution amounted to nothing---- as in zero, zip and zilch.
That's because the Fed does not levitate the main street economy through some kind of magical mystery monetary potion. It's one and only tool is fostering household and business credit growth, which, in turn, gets applied to enhanced spending for consumer and capital goods beyond what is supportable from current income.
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