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Moments ago, I finished watching the premier of the PBS Frontline special about the Federal Reserve. It was pretty good, although there wasn’t a single morsel of information that was new to me (I mean, come on, this is just about all I read and write about, so a general interest program isn’t going to be novel for me). The attitude of the program was actually pretty softball, since my own disposition, were I to be the show’s producer, would be to have the American public mentally file away Ben Bernanke and Jerome Powell in their heads right next to Josef Mengele and Jeffrey Dahmer.
I must comment on one person, however: Neel Kashkari. To Mr. Kashkari’s credit, he was the only current Fed official who had the balls to get in front of a camera. Those of you familiar with Neel’s disposition will not be surprised to know he maintained his role as the Fed’s tireless apologist, and he held the Fed’s candle high and proud throughout the entire broadcast.
What struck me specifically was when Neel was asked about the Fed’s obvious and direct effect on the grotesque wealth disparity in our once-great republic. Kashkari’s response, which was echoed by quite a few others, was essentially that, well, that wasn’t really our intent, but golly gee, if that happens to be a side-effect of our noble programs, gosh, that’s too bad, but we didn’t mean it, honest injun.
Yet what made me just about fall out of my seat was when he said something like this (I am paraphrasing, but this is very close): “It’s true, asset prices have been going up. But most people don’t own a house, don’t own a 401-k, don’t own stocks, so they don’t have those things that have been going up in price. But what a lot of people don’t remember is that the number one asset for poor people is their job, and what we’ve been doing is making that asset go up in value. So everyone benefits.”
To which the only sane response is:
An asset? An asset? A job is not an asset, you bald-headed twit! I mean, yeah, it’s a good thing to have, but just because assets are good things and jobs are good things doesn’t make them identical!
Let’s say I wanted to feed my family. In the fridge I’ve got steaks, potatoes, carrots, milk, eggs, coconut milk, ice cream – – those are all valuable assets. I might also be good friends with a farmer. He can perhaps provide food, yes, but my friendship with him doesn’t mean he’s an asset. My family can enjoy the steak and potatoes. They can’t enjoy my friendship with the farmer. They are two different things. How can the goddamned President of a Federal Reserve Bank not understand this? A relationship isn’t the same as a financial asset.
Oh, and one last thing. I stumbled upon this chart tonight, and it’s a gem. It shows the ratio of equities to the GDP since the time Harry Truman was the President. I have added the red and green trendlines to suggest the long-term channel.
I’ll give you as much time as you need to figure out if stocks are overpriced or underpriced. Go ahead, and good luck.
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