Tatiana Dementieva
The former budget advisor under Ronal Raygan's administration, of the founders of the so-called Rayganomics, David Stockman, is a big adversary of the Federal Reserve's policies. He thinks that artificial interest rate cuts coupled with uncontrolled QE (money printing) creates madness in financial markets, thus separating asset evaluation from their intrinsic value of those assets.
He publishes his articles in major economic periodicals and on related websites. In 2014, he started an online newspaper named Contra Corner. In one of his articles named "The Biggest Threat To Your Financial Well-Being And What You Can Do About It", he describes the current state of the American economy as difficult. In particular, he writes that while stocks are around all-time highs, companies are destroying their balances to buy back their stocks, implementing bloated mergers and takeovers, while politicians are destroying the economy and depriving millions of their means to provide for their families. At the same time Washington doesn't seem to be able to handle the fiscal problems.
In his opinion all of that is the result of a big financial fraud (7 trillion dollars), and the Fed is to be blamed for that. While working in Raygan's administration, Mr. Stockman was skeptical about controlling the economy through controlling the money mass. What the Fed has been doing for a while is beyond the scope of any sane monetary recommendations.
The central bank's balance has been growing much faster than the national economy. Over the last 17 years, the Fed's balance has increased by 983% against a 192% GDP increase. As a result, the excessive liquidity favors speculative and faulty investments, coupled with the collapse of the financial discipline in all the layers of the American society.
Thoughtless Wall Street Traders and Washington Politicians
All of them got false price signals and changed their behavior accordingly. Wall Street investors turned into traders speculating the assets through various financial leverages.
At the same time, corporate managers have been focused on financial engineering instead of engineering the ways to leverage the production efficiency. Middle-class households have now turned into debt salves living at the expense of the funds they borrowed while Washington politicians are having "free lunches" at the expense of the growing sovereign debt, without caring about the future.
The tragedy boils down to the fact that thoughtless Wall Street traders and Washington politics, once in an an extremely inflated financial bubble, do not understand that all of that is a joke, Mr. Stockman writes. With that being said, he predicts that this wreckless policy of the Fed's is doomed to end up with a major crash never seen before, and most people aren't ready for this.
Tatiana Dementieva
