New York Fed President William Dudley, in what had to be the understatement of the year thus far, said the following at a meeting of business leaders in Queens in regards to the objectives of full employment and price stability:
"Faster progress toward these objectives would be very welcome."
Yes, given that there hasn't been full employment ever in the United States, even since the establishment of the Federal Reserve, an institution established with full employment as its objective, faster progress would be very welcome. Given that the 8.9% unemployment statistic relies on the omission of people who have given up looking for work, and the real unemployment rate is somewhere around 22%, with one and in every five Americans now on some form of government assistance, faster progress would be very welcome.
And it would have been possible, had we actually dealt with the systemic issues that led to our economic crisis. You know those issues, bad mortgages built on fraud and profits generated thereof. We'd have liquidated several large banks and gradually unwound their bad assets, and we'd have burned all the speculators and hedge funds who incentivized a decade of fraud and excess. Imagine, if you will, a ruthlessly capitalistic solution to the problem of too big to fail: banks going bankrupt based on the realities of their balance sheets, with no off-sheet structuring allowed!
We'd have no more Goldman Sachs, no more JP Morgan Chase, no more Bank of America, no more Citigroup...and what would we really have lost? A bunch of overpaid assholes who built profits out of mirages and fraud, while wrecking the world's economy in the process.
But faster progress has to be delayed in order to preserve and perpetuate a failed system, as opposed to allowing it to fail of its own excess and due to its own utter lack of merit apart from getting politicians to commit taxpayer money and the full faith and credit of the United States towards its survival. Is that even merit? Is it?
What disturbs me about the Tea Party and Republican Party is this: we're all worked up about pension funds and public unions, but the reality is we just dropped $23.7 trillion in loans, guarantees, and outright giveaways on the financial sector. Public unions don't even compare to the financial sector in their demands. And what's even better is this: we will get another chance to deal with the financial sector.
All those bad assets and subprime mortgages and toxic securities are still on the balance sheets. That's right. After $23.7 trillion in loans, guarantees, and bailouts, the problems are still there. The bad habits are still there. I don't even have a job, because I'm in graduate school, and I get at least half a dozen pre-approved credit offers a week. My wife, who has thousands of dollars in debt, is clinically depressed, and is afflicted with fibromyalgia, epilepsy, and migraines, gets even more offers than I get. Between her $400 a month in prescriptions and her past medical bills, she doesn't have the money to justify receiving any additional credit lines, much less the ones she already has.
Congratulations, banking industry: you're still dumber than hell. Still giving out lines of credit to people with no income, no jobs, and no assets to speak of. What an amazing strategy for success! The difference between myself and a lot of other Americans is that I have one credit card, which hasn't even been activated yet. I got it for an actual emergency, and when I have one of those, I suppose I'll activate it. And yes, I got it because it had a zero percent APR until November. Should I not have an emergency between now and then, I'll cancel the damn card and get another zero percent introductory APR card. I take it out and look at it every now and then, and think about how awesome it is to have a Capital One Platinum Card with the Constitution on it.
The only income I have consists of loans for school, and these idiots are sending me pre-approved credit applications left and right. It was interesting to listen to the pundits on CNBC talk about the cons of paying down your debt and canceling your credit cards, because they were noting that you needed to be in debt to qualify for a mortgage and credit cards were "ideal" for that purpose. Let's all pause for a moment and think about the society we've created: only the people who are dumb enough to go for 14.99% to 24.99% APR are building the kind of credit necessary to qualify for a home mortgage. That seems like a really productive and intelligent way to build credit and qualify for home ownership, doesn't it? Those are exactly the kind of candidates I'd want to lend to if I were a banker!
You can't have faster progress when you're dragging around this kind of an anchor behind you. It slows you down when you're trying to prolong the last gasp of a system that has completely and utterly failed to a point where you can't foreclose on delinquent properties because no one knows where the damn title is. But such is the way of our world: we incentivize failure and punish sagacity. Since I refuse to incur revolving debt in my name at 14.99% - 23.99% APR (the range of possible interest rates for my card should I choose to ever activate), I'm the guy who can't get a home loan at a decent interest rate. Hell, I'm the guy you want on a mortgage. I'm not going to declare bankruptcy due to my overwhelming credit card balances! I don't have any!
But Mr. Dudley works for the Federal Reserve, a private bank owned by other banks like Citi and JP Morgan Chase, and he isn't interested in upheaval. Mr. Dudley is interested in staying the course, even if that course means another round of economic collapse in the future. Recessions are just natural occurrences, don't you know. They don't have anything to do with excess liquidity and malinvestment as a result of that excess money. They just...happen.
As the article in the Huffington Post tells it, Dudley has no worries about inflation as a result of commodities prices, which have gone through the roof as a result of speculators taking the extra dollars created by quantitative easing and plunging it into futures:
"In his speech, Dudley said some of the commodity price rises are likely to be temporary and unlikely to feed through into a sustained rise in inflation."
Of course Dudley has no worries! The government doesn't count food or energy in its inflation statistics! How can they contribute to inflation when they're exempted from the count!
There's no reason, even if the economy picks up steam and jobs are coming back, to really entertain the idea of raising interest rates and putting an end to the easy money generated by expansions of the monetary supply and quantitative easing:
"Dudley reiterated that a stronger recovery is not a reason for the Fed to reverse course."
In June of this year, the second round of quantitative easing will end. However, the economy would have to add six million jobs between now and then for the Fed to consider its mandate of full employment near fulfillment. I think we know that isn't going to happen, so what Dudley meant to say was this:
"We're going to have a third and fourth round of quantitative easing, because failure to do so would mean that our carefully orchestrated appearance of recovery would collapse and then everyone would actually want to deal with the banks we really represent. Oh, you thought I was talking about your full employment? No, no, no! I was talking about full employment for the likes of Goldman and JP Morgan and Citi!"
Whatever liquidity is created out of future rounds of quantitative easing will go somewhere, and the likely candidates are in futures markets both here and abroad. Get ready for soaring commodities and stunning speculation. Quantitative easing is in the bag and on the way for the foreseeable future, common sense be damned.