On September 18, 2013, Patrick Rizzo reports on NBC News:
The Federal Reserve said Wednesday it would keep its foot pressed firmly on the economic stimulus gas pedal.
The move surprised many who thought the central bank would cut back on its $85 billion a month priming of the economy.
Markets have been expecting the Fed to “taper” ever since its policy-setting Open Markets Committee began dropping hints about the gradual decrease of monthly asset purchases aimed at keeping rates at historic lows.
“This is incredibly wimpy,” David Kelly, chief market strategist at Morgan Stanley, told CNBC.
But the Fed said it wanted more time to scrutinize the economy, which has been sending out mixed signals recently.
“Taking into account the extent of federal fiscal retrenchment, the Committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program a year ago as consistent with growing underlying strength in the broader economy. However, the Committee decided to await more evidence that progress will be sustained before adjusting the pace of its purchases,” the Fed said in a statement after a two-day meeting to discuss the economy and interest rates.
The Fed said, as it has for several past statements, that the economy continues to expand at a moderate pace. It said unemployment remains high, even though there are some signs of improvement.
“Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen further and fiscal policy is restraining economic growth,” the Fed’s statement said.
Stocks surged on the news, which meant that businesses and consumers could continue to borrow at historically low rates.
The statement served both as a notice that the Fed remains in the easing game, and that it is unmoved by a recovery that has seen auto and home sales surge and employment show slow but steady growth.
The Fed also downgraded its outlook for the economy.
Officials said gross domestic product growth will be in the 2 percent to 2.3 percent range this year, down from 2.3 percent to 2.6 percent forecast earlier this year. It also cut the 2014 forecast to 2.9 percent to 3.1 percent from 3.0 percent to 3.5 percent.
“Surprising news today but the Fed clearly is concerned about lower labor participation rates and the real estate sector,” said Michael Yoshkiami, CEO of Destination Wealth Management. “Looks like they are determined to avoid premature celebrations that all is well. (Chairman Ben) Bernanke is drawing from his academic background and lessons from the Great Depression.”
Chairman Benjamin Bernanke and other members of the Federal Reserve need to wake-up and implement Section 13 paragraph 2, which directs the Federal Reserve to create credit for local banks to make loans where there isn’t enough savings in the system to finance economic growth.
The Federal Reserve was intended in part to replace the government debt-backed United States Notes (Greenbacks), National Bank Notes, and Treasury Notes of 1890 with private sector asset-backed Federal Reserve Notes.
U.S. entry into World War I was financed on debt, which resulted in backing the new Federal Reserve Notes with government debt rather than private sector assets. This was being paid down when the 1929 Crash came, fueled by money creation for speculation on Wall Street, driving the Dow up to unheard-of levels.
The Keynesian New Deal was financed on debt, and then World War II (against Keynes’s own recommendation!), causing debt to balloon. The idea that only government debt can back a currency instead of private sector assets has resulted in a global economy where an asset-backed reserve currency simply doesn’t exist any more.
In 1935 Dr. Harold G. Moulton, then president of the Brookings Institution, presented a counter proposal to the New Deal that was based on private sector initiative backed up with asset-backed instead of debt-backed financing. It was completely ignored.
Bernanke has yet to support the policies that will result in substantial double-digit GDP growth while simultaneously broadening, private sector individual ownership in FUTURE wealth-creating,income-generating productive capital assets.
What is needed is to implement the Capital Homestead Act. (http://foreconomicjustice.org/?p=8942) with interest-free capital credit loans made available via super-IRA-typle CHA accounts, repaid with the future earnings of the investments. Thus, instead of the Federal Reserve slashing bankers’ cost of money, the capital credit loans would be directed to enrich ordinary Americans by systematically broadening private sector individual ownership of the formation of FUTURE productive capital investment to empower EVERY American to accumulate over time a viable capital trust (super-IRA) portfolio of stock in diversified companies and reap the full earnings payout of corporate earnings as dividend income to support their livelihood and retirement.
Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.
The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.
Support the Agenda of The Just Third Way Movement athttp://foreconomicjustice.org/?p=5797
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice
Support the Capital Homestead Act athttp://www.cesj.org/homestead/index.htm andhttp://www.cesj.org/homestead/summary-cha.htm
See “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.orghttp://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624and “The Income Solution To Slow Private Sector Job Growth” athttp://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.
http://www.nbcnews.com/business/fed-keeps-economic-stimulus-program-intact-now-4B11190408
