Americans Don't Benefit From Fed Inflated Asset Prices

From Real Clear Markets: 

There are few who would deny that the rates of return for stocks, real estate, and business equity depend primarily on the strength of the economy and how fast the economy is growing. Board members at the Federal Reserve, however, believe the converse: that the strength and pace of the economy is primarily dependent on the rates of stock, real estate, and business returns.

As such, their accommodative monetary policies target and inflate these very assets before the underlying economy justifies their returns. All Americans benefit from a healthy economy that provides higher wages, more purchasing power, and gains in productivity and innovation. Few benefit from higher asset prices when targeted and juiced by loose money.....


The Dow's recent rise above 13,000 arguably owes much of its appreciation to the accommodative monetary policy of the Federal Reserve. This should not, however, be a reflection of an improving economy as Fed chairman Ben Bernanke is so quick to reference and take credit for. Much of the profits and investments of Dow Jones and S&P 500 companies take place and stay in other countries and do not benefit Americans who are themselves not invested....

A growing economy only benefits the economy as a whole, and thus those at the bottom,  if  growth comes in the form of operational innovation and gains in productive efficiencies. This means the ability to do more with less, to grow by leaps and bounds while driving down the cost of inputs.  

This was the case in the ‘80s and ‘90s, where for two decades technological and industrial innovation and efficiency gains allowed America to grow tremendously while having little to no effect at all on the price of commodities and the relative cost of labor. Real mean incomes grew nearly every year between 1981 and 2000 and 38 percent over the entire period according to the U.S. Census Bureau. Real wealth was created. The economy grew as a whole.

Then loose fiscal and monetary policies entered the story, and over the past decade the exact opposite has occurred. Commodity prices are skyrocketing, real mean incomes are at 1997 levels; having fallen nearly every year since 2000 according to the Census, and yet the relative cost of labor in America is still high.

Real wealth is not being created.

Supporting stocks, business equity, and real estate through accommodative monetary policy merely accumulates wealth at the top and starves the remainder of the population from innovation and efficiency gains so needed for benefits to be felt by all members of the economy....

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Link:
http://www.realclearmarkets.com/articles/2012/03/08/middle_class_america_doesnt_benefit_from_inflated_asset_prices_99554.html