In 2008, the Fed began ‘fire-hosing’ trillions of dollars into the financial system, specifically to ‘rescue’ major banks and insurers that were teetering on the edge of their self-made massive capital holes.
The banks were resuscitated. Excess reserves propelled stock prices higher and higher, while the economy merely crawled…
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January 15, 2016 The Chart That Explains Everything
Excerpts:
What the chart [above] shows is that the vast increase in the monetary base didn’t impact lending or trigger the credit expansion the Fed had predicted. In other words, the Fed’s madcap pump-priming experiment (aka– QE) failed to stimulate growth or put the economy back on the path to recovery. For all practical purposes, the policy was a flop.
QE did, however, touch off an unprecedented 6-year bull market rally that pushed stocks into the stratosphere while the real economy continued to languish in a long-term slump. And the numbers are pretty impressive too. For example, the Dow Jones Industrial Average, which bottomed at 6,507 on March 9, 2009, soared to an eye-popping 18,312 points by May 19, 2015, an 11,805 point-surge in just five years. And the S&P did even better. From its March 9, 2009 bottom of 676 points, the index skyrocketed to a record-high 2,130 points on May 21, 2015, tripling its value at the fastest pace in history.
What the chart shows is that the Fed knew from 2010-on that stuffing the banks with excess reserves was neither lowering unemployment or revving up the economy. The liquidity was merely driving stocks higher.
It’s worth noting, that the Fed knows that credit does not flow into the economy without a transmission mechanism, that is, unless creditworthy borrowers are willing to to take out loans. Absent additional lending, the liquidity remains stuck in the financial system where it eventually creates asset bubbles. And that’s exactly what’s happened. Instead of trickling down into the economy where it would do some good, the Fed’s monetary stimulus has cleared the way for another catastrophic meltdown.
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[Fed Chairman Ben Bernanke – November 2009]: “As a scholar of the Great Depression, I honestly believe that September and October of 2008 was the worst financial crisis in global history, including the Great Depression. If you look at the firms that came under pressure in that period. . . only one . . . was not at serious risk of failure. So out of maybe the 13 of the most important financial institutions in the United States, 12 were at risk of failure within a period of a week or two.”
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There is now a new liquidity “transmission mechanism” that will complete the story, reigniting economic growth power for main street America.
A Citizens Credit Facility, within The Leviticus 25 Plan, will serve as the conduit for direct liquidity extensions to U.S. citizens – eliminating massive debt burdens and restoring financial health at the family level in America.
The Leviticus 25 Plan will help get millions of Americans off government social welfare programs and free them from dependence on government and over-stressed charity-based organizations.
The Plan will produce something else that the Fed’s 2008-2010 multi-trillion dollar financial system bailout could not do: millions of financially healthy, “credit-worthy” customers for U.S. banks.
The Leviticus 25 Plan 2017 – $75,000 per U.S. citizen The Leviticus 25 Plan 2017 (1306)