The stock market no longer has any real relationship to the broad U.S. economy, and obscures epic policy failures in Washington D.C., according to blogger Thad Beversdorf, who comes armed with plenty of financial data to prove his points.
The Federal Reserve has killed off bears with never ending gobs of uber-easy money, so there has been nowhere for stocks to go but up, asserts Beversdorf, a former senior vice president at Jefferies Group.
“The question then becomes can this bull run forever? If the downside risk has been removed from market forces, and let’s be clear that is exactly what the Fed has done, then yes it can at least until the ink runs dry in the printing presses,” he writes on his blog First Rebuttal.
Beversdorf cited Census Bureau data that shows real median household income in the U.S. slumped from $57,000 in 2000 to $52,000 at the end of 2012 – a 10 percent decline.
He offered data from the Federal Reserve Bank of New York that estimates U.S. total household debt soared from about $5.5 trillion in 2000 to about $11.65 trillion now, while median family net worth plummeted from a high water mark of $126,400 in 2007 to only $81,200 in 2013.
Meanwhile, Beversdorf said data from the Census Bureau, Heritage Foundation and other sources shows the number of Americans in federal programs is up 60 percent since 1998, and the Heritage index of dependency on government is up an alarming 180 percent during the same time.
“Now I don’t have an issue with… market ‘pros’ touting a 20 year bull run. But lying about how we are managing a 20 year bull run undermines the struggle felt by the American middle class,” Beversdorf wrote.
“The middle class has been flooded with underpriced debt to cover up the collapse in natural demand that stems from the above figures. All of this is done to perpetuate the lie that the above figures are not so; that the American middle class is strong and healthy…”
In Beversdorf’s view, the fact recent gains in stocks to all-time highs have come on thin volume just shows the worthless leverage of each cheap dollar infused into the economy by the Fed.
“What used to be an efficient allocation of finite earned money is now simply a function of infinite printed money,” he wrote of the stock market. “It’s a pyramid scheme but it’s a pyramid scheme with an endless supply of money to be pushed in the bottom and that equates to a real life golden goose.”
“This brings me back to my original point that if we fail to acknowledge the market no longer has any relationship to the broader economy then we will fail to implement appropriate policies to stimulate economic growth. And by failing to do so we continue the devastation to the middle class. The continuation of the notion that the Fed guaranteeing rising stock prices will somehow boost economic growth despite 6 years of failing to do so is a complete failure by our policymakers.”
At asset manager Alhambra Partners, Jeffrey Snider, head of the firm’s global investment research, concludes that the Fed’s massive quantitative easing (QE) has failed because it has done nothing for the real U.S. economy even while it has produced asset inflation such as nose-bleed highs in stocks and bonds.
In a column on the company website,
Snider said both the Fed and the Congressional Budget Office have forecast a “’big jump’ in GDP only just around the corner every year in this ‘cycle.’And every year as the economy seriously underperforms all projections, that ‘jump’ is pushed outward by the same calendar space.”
“In their own way, backwards as it clearly is, orthodox economists are arriving at the same conclusions common sense dictated many years ago – that QE doesn’t work and probably makes things worse,” Snider said.
© 2024 Newsmax Finance. All rights reserved.