Washington, DC -- (ReleaseWire) -- 09/22/2016 --Last Tuesday, at a conference in Washington sponsored by Stanford and the University of Chicago, Federal Reserve Chair Emeritus Alan Greenspan told attendees that we are in the "worst economic and political environment that I've ever been remotely related to," going on to hope that we can collectively find a solution because America is too great a country to be "undermined, by how should I say it, crazies." When asked about that comment on Wednesday, Greenspan declined to identify which "crazies" he was referring to, in particular, but looking in from the outside it's easy to identify some possibilities. Clinton? Trump? Clinton and Trump? Janet Yellen and the Fed easy-money regime that Greenspan himself established as the inescapable de facto monetary policy of not just the United States, but the world?
Speaking of crazy, over the last few weeks Donald Trump has had the temerity to speak sanely about the Federal Reserve, baldly pointing out truths about that institution that are normally hinted at or swept under the rug. He told Reuters that Fed policies have created a "false economy" and an "artificial stock market," and followed up with comments to CNBC that Janet Yellen should be "ashamed" for keeping interest rates so low for so long. Trump also shined a light on the elephant in the room: the Fed's notional independence from politics. He called out Yellen for keeping rates artificially low so that the incumbent party isn't hit with the onset of reality before the election and President Obama's retirement from office in January. Is that crazy? The Fed is independent, right? Is it? Barney Frank advised the Federal Reserve Board during the recent Jackson Hole conference not to risk destabilizing markets, saying, "What the Fed should do this close to the election is make no waves."
This message, that politicians and the Federal Reserve are acting to benefit not the American people or the economy as a whole, but to benefit… politicians and the Federal Reserve, is becoming more and more obvious to all of us. The drumbeat of propaganda about a recovery that seems to skip the hollowed-out middle class is increasingly falling on skeptical ears, and the realization that our political and economic systems are a stew of lies and incompetence is fueling a surging populist movement.
What do Bernie Sanders and Donald Trump have in common, aside from growing up in New York's outer boroughs and a dislike for trade deals? Populist appeal, built on the kind of rhetoric that calls attention to the fact that the emperor is, in fact, naked. Despite their vast differences, the surprising successes of both Trump and Sanders reflects a growing sense among many Americans that the system is broken. The media provides broad generalizations and calls them truths: Democrats take climate change as religion, support immigration as a free pass, and believe that fairness is a government entitlement that can be provided by the stroke of a pen on an executive order. Republicans all carry guns, hate women and homosexuals and people of color, and are sitting around at Tea Party meetings plotting to overthrow the government. Libertarians? Well, the media seems stuck on generalizations except that they probably smoke a lot of pot.
In this environment, more and more of us are opting out, whether by choosing a populist "Republican" candidate in Donald Trump, someone who expresses our anger, dissatisfaction and, yes, confusion, or by simply throwing up our hands in disgust. When the free market is anything but free, when political discourse is a series of pats on the back and knee-jerk attacks, when our own government, our own media is telling us that up is down and wrong is right, what choice is there? What Washington doesn't realize, it seems, is that they created this mess.
A perfect example is this: Washington pushed banks to offer loans to people who couldn't afford them, and they did this with a right sort of goal in mind: to boost home ownership in the United States. It became popular to take money out of the supposed growth in value of these homes and spend it on day to day living expenses rather than trying to pay it down. When the housing market started to slow and people began panicking, it was no longer possible to automatically sell your house off at a profit. With a collapsing market, people found themselves in a world of debt just as the economy was slowing, and that meant more foreclosures and defaults just as the housing market collapsed. Who was hurt the most? Lower and middle income Americans who had stretched their budgets to take part in the DC-led frenzy of borrowing. So, what did Washington do? They doubled down, pumping more cheap money into the system and inflating more bubbles, which helped the banks and not the everyday Americans that had been hurt by the collapse of the last one. And then, they told us we were in a recovery and everything was coming up roses.
Not only individual Americans are opting out. The stock market itself is in the process of disappearing. According to a CNBC report citing data from the University of Chicago, there are 3,267 stocks currently trading on the major U.S. exchanges, the lowest number since 1984. Jefferies Equity Research strategist Steven DeSanctis echoed this, citing a lack of IPO activity, lack of pickup of M&A, and severe corporate buybacks as reasons that the market is shrinking. Much of the money for these buybacks, corporations purchasing their own stock in order to go private, has come from central bank quantitative easing, making this essentially the largest leveraged buyout in history. And, it's being paid for by all of us, by every American taxpayer. If the IPO market continues to dry up and companies maintain this level of buyback activity, eventually we'll run out of stock to buy and the market will disappear along with our free markets.
In the end we have to ask: who are the crazies in this scenario? The politicians and policy makers and bankers who keep doing the same thing and hoping for different results? Or is it us, the Americans who have grown angry at not just personalities and policies, but the deeply ingrained lies, incompetence, and inequities that we're asked to swallow every time we turn on the television or read the news? I'm pretty sure it's not us.
For over a quarter century, Dawn Bennett has been successfully guiding clients through the complexities of wealth management. Her unique vision and insight into market trends makes Bennett a much sought after expert resource with regular appearances on Fox News Channel, CNBC, Bloomberg TV, and MSNBC as well as being featured in Business Week, Fortune, The NY Times, The NY Sun, Washington Business Journal in addition to her highly regarded weekly talk radio program - Financial Mythbusting. Through prudent and thoughtful advice, Dawn Bennett has strived to consistently provide the highest quality of guidance.
About Dawn Bennett
Dawn Bennett is CEO and Founder of Bennett Group Financial Services. She hosts a national radio program called Financial Myth Busting http://www.financialmythbusting.com.
She discusses educational topics and events in the financial news, along with her thoughts on the economy, financial markets, investments, and more with her live guests, who have included rock legend Ted Nugent, as well as Steve Forbes and Grover Norquist. Listeners can call 855-884-DAWN a as well as take podcasts on the road and forums for interaction.
She can be reached on Twitter @DawnBennettFMB or on Facebook Financial Myth Busting with Dawn Bennett.