Council of Economic Advisers Chairman Kevin Hassett appears on Fox Business news to discuss the impact of the Federal Reserve’s interest rate hikes on the Main Street economy and the state of the Wall Street stocks.
The key metric is to accept what’s happening around us. Fed rate hikes are hurting Wall Street (investment class). However, Fed activity is not yet impacting Main Street. This is because the two economic engines (Wall St. -vs- Main St.) are so far apart.
Part Two of this interview (and expanded review) is below:
Three decades of monetary and administrative policy has favored Wall Street (globalism) over Main Street (nationalism). Decades ago… Main Street and Wall Street used to be connected; stocks were evaluated on company performance; the companies were mostly American, and invested in the success of USA (middle class).
However, changes in monetary policy and political priorities, specifically to the benefit of Wall Street investment instruments (multinational global expansion), drove Wall Steet and Main Street ever further apart.
As a direct result when the Main Street economic engine becomes the focus of favorable policies (trade policy, energy policy, manufacturing policy, tax policy, deregulation etc.), the domestic US economy expands… bigly…
….AND now the Fed takes action in response to ever-expanding strength in our Main Street economy; but, that Fed action will take time to traverse the decades-wide gap… and the first impact will be negative to the original benefactor; the one closer to the actual monetary policy, that’s Wall Street.
I hate to keep harping the point, but this was predicted two years ago:
Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.
Think about these engines doing a turn about and beginning a rapid reverse. GDP can, and in my opinion, will, expand quickly. However, any interest rate hikes (monetary policy) intended to cool down that expansion -fearful of inflation- will take a long time to traverse the divide. (more)
The Fed is using the opportunity of a strong national U.S. economy, and strong growth in U.S. wealth, to withdraw all of the underlying stimulus money (cheap money) that was needed to fill the gap during the global exfiltration of wealth under prior administration policies.
During the Bush, Clinton-Clinton, Bush-Bush, Obama-Obama years, Main Street middle-class Americans became more poor. Wall Street investment class became more rich. Multinational corporate globalism drove the policy. The wealth gap is a direct result.
Over the past 30-years, increased income subsidies became a part of administration policy in an effort to fill a void from depressed wage growth. Welfare and food stamp distribution necessarily expanded.
President Trump’s economic policies are the exact opposite of globalism. Policy to the benefit of working middle-class Americans (ie. America-First nationalism) is against the interests of the corporate multinationals.
Yes, it is unfair to President Donald Trump for the Federal Reserve to essentially buy back all the cheaply printed money used to prop up Wall Street’s schemes. After all, it is a Fed action only possible because the U.S. economy is so strong. President Trump’s success is essentially providing the Fed the opportunity to strengthen dollars and make them more valuable. However, it is what it is…. though Trump’s annoyance is well understood.
Wall Street is getting hurt most; there is more pain ahead for those investment instruments on Wall Street that are dependent on globalism; but the negative Fed impacts to Main Street –as a whole– will not be felt in the aggregate until the two engines once again gain parity.
Again, as predicted: “Those who benefit from high-yield international investment instruments will see less wealth. Those who live on savings will see a benefit. Those living day-to-day and week-to-week on their paychecks will see more income and wealth.”
2016 – […] Those global manufacturing economies will first respond to any increases in export costs (tariffs etc.), by driving their own productivity higher as an initial offset, in the same manner American workers went through in the past two decades. The manufacturing enterprise and the financial sector remain focused on the pricing.
♦ Inflation on imported durable goods sold in America, while necessary, will ultimately be minimal during this initial period; and expand more significantly as time progresses and off-shored manufacturing finds less and less ways to be productive. Over time, durable good prices will increase – but it will come much later.
♦ Inflation on domestic consumable goods ‘may‘ indeed rise at a faster pace. However, it can be expected that U.S. wage rates will respond faster, naturally faster, than any monetary policy because inflation on fast-turn consumable goods becomes re-coupled to the ability of wage rates to afford them.
The monetary policy impact lag, caused by the distance between federal fiscal action and the domestic Main Street economy, will now work in our favor. That is, in favor of the middle-class.