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News From The San Francisco Federal Reserve

View the full document here. Mark Speigel from the San Francisco Fed details his optimistic opinions.

 

A few points to balance his views…

“Third-quarter GDP growth was revised upwards to 4.1% “

“Inflation remains below the Federal Open Market Committee’s (FOMC) longer-run goal of 2%”

Does this mean anything to anyone? I haven’t checked recently but considering they change the metric for calculating GDP and inflation as often as they change underwear it’s hard to value these numbers.

 

Shadowstats.com has some alternate metrics which were used by the government in the past. The include some very important data like food, fuel and home prices. As you can see they vary a lot from the governments reporting.

 

 

 

“The Committee will add to its holdings of mortgage-backed securities at a pace of $35 billion a month rather than $40 billion a month, and will add to its holdings of longer-term Treasury securities at a pace of $40 billion a month rather than $45 billion per month. The statement noted that asset purchases are not on a preset course. The Committee also indicated that it now anticipates that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that unemployment declines below 6.5%. “

 

It’s been a weird experiment to watch the monetary powers that be muddle through the economic crisis testing their footing as they step forward. But the language above is clear is day…they will attempt to withdraw QE unless a problem comes up.

Those potential problems could be the following;

1) Fall in real estate values due to higher interest rate

2) Higher interest rates for corporate bonds (more retail stores closing unprofitable locations)

3) Reversal of stock market prices

4) Gridlock in the derivatives markets

5) Reduction in Government spending

 

I could go on and on but these are the big starters which would kick off another recession. I do believe however that they will reverse course and begin printing money as required to offset any of these issues. Which is good in the short term because we can see business as usual but bad in the long term as the economy becomes brittle and weak.

 

Minimum Wage California

The minimum wage hike is not a huge problem in itself. Its a problem of government and voter psychology. The real scary part of the minimum wage hike is the lack of planning.

We all know the problem  with minimum wage hikes. They don’t solve any real problems in employee wages because either $8 or $10 an hour you are still poor as can be.

They also lead us away from the real solutions of lower taxes, less regulations and increased opportunity. Maybe next year we should just raise it too $25 dollars an hour. Then we could all get really rich!

 

Knowledge = Dividends

beach An investment in knowledge always pays the best interest.     – Benjamin Franklin

 

Benjamin Franklin was a very smart man. If you haven’t read his autobiography I suggest you do so.

There’s a few things you could take away from this quote…

In today’s economy their is a dream or belief in getting rich while doing nothing is the apex of success (and hubris). We live in a society where we actually believe in something for nothing. But as the economy evolves faster and faster we will need to realize more and more that we are sending our hopes and dreams to wall street and Washington D.C. We might as well be sending them to Las Vegas because the odds are basically the same. When the economy changes we no longer adapt as a nation. Instead we refuse to learn, change and grow. Now our economy is so rigid and frail nothing short of 85 billion a month will maintain our addiction to ignorance. We need to value real knowledge instead of chasing the knowledge of “how to earn a living without really doing anything of substance”