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Politics : American Presidential Politics and foreign affairs -- Ignore unavailable to you. Want to Upgrade?

To: Peter Dierks who wrote (63468)	3/23/2013 5:48:32 PM
From: FJB	1 Recommendation Read Replies (1) \| Respond to of 71588

FoxBusiness Still Can't Do 5th Grade Math from LittleJoe I can not call this ignorance; it has to be intentional lying. According to Higgins, if it were not for the monetary stimulus, the economy would probably be facing growth of a 1% annual rate or less. As it is, he expects growth to come in at a 2.5% pace in the first quarter. The U.S. central bank has held overnight interest rates near zero since December 2008 and has pumped about $2.5 trillion into the economy by purchasing Treasury debt and mortgage-backed bonds in a bid to foster faster growth and lower unemployment. On Wednesday, it recommitted to plans to buy $85 billion worth of bonds each month and said it would keep buying assets until it sees a significant improvement in the labor market. 1.5% of $16 trillion (US GDP) = $240 billion. $85 billion of "QE" monthly = $1,020 billion annually. This must result in a nominal increase in GDP of that same $1,020 billion, or 6.4%, because every dollar injected into the economy via such a process has to be spent on something. Since nominal GDP is in fact going up at *less* than 6.4% this means<span style="font-size:1.3em;"> *the economy is in fact contracting* -- you are seeing your purchasing power destroyed instead to the tune of about 5% a year!</span> And this, in fact, is almost-exactly what the numbers show. Nominal household income hasn't been growing but the cost of living has. While the so-called CPI shows little inflation the CPI tables intentionally understate many expenses such as claiming that health insurance costs are 0.65% of the household budget (Really? Less than 1%?) This is laughable even if *ignore* the cost-shifting into the employer side and look only at people who are (1) self-employed and (2) over 65 and thus paying Medicare, Part D and Gap premiums. Even only accounting for those people this percentage is a farcical claim. The salient point is that when you perform "QE" you are increasing the amount of credit and money in the system and that percentage of "growth" is thus *guaranteed* to show up in GDP. It thus must be *subtracted back off* the reported nominal GDP figures to figure out what the real economy is doing. The fact of the matter is that the real economy is and has been *collapsing* since 2008 and nothing The Fed has done since has addressed this. Never mind that there's been no real improvement in the employment situation either.