Here’s How Bernanke’s Bubble Trickle Down Is Working For US Manufacturers

Core capital goods orders, adjusted by the PPI to reflect the actual volume of orders over time, fell 1% year to year in April. We know that the BLS is understating the inflation rate, so the actual trend is probably worse than this. But this is bad enough.

Follow the money. Find the profits!

Liquidity is money. Regardless of where in the world that money originates, eventually it flows to and through Wall Street. So if you want to know the direction of the next big moves in stocks and bonds, just follow the money. Lee Adler's Liquidity Trader tracks and shows you the monetary forces that drive markets, like the daily real time Federal Withholding taxes shown in this chart. Follow the money. Find the profits! Try it for 90 days, risk free!

Real Core Capital Goods Orders- Click to enlarge

Real Core Capital Goods Orders- Click to enlarge

The recent “recovery” may be beginning the next down cycle from a weaker level than each of the last two expansions. Is this despite 6 years of money printing and ZIRP? Or because of it?

QE and ZIRP stimulate financial engineering and wild speculation, not industrial engineering and prudent capital investment. I’d argue that they divert capital away from rational investment in favor of easy money schemes like HFT and “riskless” free carry trades. They encourage corporate executives to issue stock options to themselves, then have the corporation buy them back, rather than invest in their companies to improve and sell more of their products.

At the very least, this is more evidence that trickle down economics doesn’t work. In November of 2010 Ben Bernanke wrote in the Washington Post that the Fed was going to pump up stock prices so that stockholders would be richer and spend more, and companies would invest more as their stock prices went up. That was the old trickle-down theory. We now know for sure that the “beneficial” effects of the resulting bubble are limited to the dealers, speculators, and bankers who benefit from central bank free money. The trickle pools at the top.

Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.