Tuesday, October 21, 2014 01:28am
North Adams, MA now: 48 °   
Send news, tips, press releases and questions to info@iBerkshires.com
The Berkshires online guide to events, news and Berkshire County community information.
SIGN IN | REGISTER NOW   

Home About Archives RSS Feed
The Independent Investor: Power Shifts from Wall St. to Washington
By Bill Schmick On: 05:01PM / Thursday September 20, 2012
Important
0
Interesting
0
Funny
0
Awesome
0
Infuriating
0
Ridiculous
0
Years ago, it was our captains of industry who commanded the world's attention. More recently, the spotlight of power was centered on Wall Street's banks and brokers until 2008. Today, however, the heads of government and central banks are the market movers.

The financial crisis of 2008-2009 turned the economy and the private sector on its head. Hobbled by the largest crisis in generations, Wall Street was drowning. With the banking sector about to implode, the Street had no choice but to ask the U.S. Treasury for an unprecedented bailout. As one corporation after another (think the auto industry) faced the threat of bankruptcy, the center of financial decision making shifted to Washington, D.C. It remains there today.

Government's role in the economy is nothing new. For many years it has guided the overall pace of economic activity, attempting to maintain steady growth, high levels of employment and price stability. For decades after the Depression of the 1930s, it relied a great deal on fiscal policy to combat the recurring recessions the nation faced.

During the 1960s, the heyday of fiscal policy, the president and Congress played a leading role in directing the economy. However, ideas about the best tools for stabilizing the economy changed after that as a period of high inflation, high unemployment and huge government deficits undermined the country’s faith in fiscal policy. Enter monetary policy (the control of the nation’s money supply) administered by the Federal Reserve Bank and its tools of interest rate manipulation.

In the midst of the panic of 2008-2009, as giant banks went broke and insurance companies teetered on the edge, the government was firing both monetary and fiscal barrels at the problem. The combined policies worked in the sense of staving off a worldwide financial meltdown and another Great Depression. Since 2008, however, because of partisan politics, fiscal policy has fallen by the wayside. Today only the monetary policy option remains to prevent another recession.

In this election year, opposing forces are criticizing the Fed for doing too much or too little to grow the economy. Conservatives say the Fed is creating inflation down the road by its stimulus policies while driving down the value of the dollar. Some have actually accused the Fed of treason in even considering further quantitative easing. Liberals have argued the opposite: criticizing the Fed for being overly worried about inflation and not doing enough to lower the unemployment rate.

Since 2007, the Fed has been engaged in a historical and largely uncharted area of economic manipulation that transcends anything attempted in our country's past. They have been at the center of propping up or selling huge institutions, making loans to banks and others in entirely new and radical ways and buying upward of $2 trillion in government debt and mortgage-backed securities. There is no question that the Federal Reserve Bank, in my opinion, has assumed the throne of financial power in this country by default.

Its power, unlike the private sector, is concentrated in a handful of individuals with considerable independence from the President and the Congress. Both the President and the Congress have all but abdicated their own power to control the economy if not in words, certainly by their actions. The polarization of both parties since the 2008 elections has made fiscal policy initiatives impossible.

The Federal Reserve Bank, through its chairman Ben Bernanke, has on numerous occasions begged the president and both parties to at least share the power via new fiscal policy initiatives. To date that call has been rejected in the name of politics. In my next column I will examine just how big the government has grown as a percentage of GDP and how power could become even more concentrated within our nation's capital in the months and years to come.

Bill Schmick is registered as an investment adviser representative with Berkshire Money Management. Bill’s forecasts and opinions are purely his own. None of the information presented here should be construed as an endorsement of BMM or a solicitation to become a client of BMM. Direct inquires to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com.





0 Comments
     
News Headlines
Pittsfield School, City Officials Prepping For Big Decisions
BArT Students Get Lesson in Chocolate, Child Labor
MBTA Rail Cars to Be Built in Springfield
Trick-or-Treat Hours for Halloween 2014
Hunting Permits Available for Hopkins Forest
BerkshireWorks Plans Events in Honor of Veterans
Adams Civic Club Seeking Broader Membership
Cariddi Hosting Information Forum on Ballot Questions
Lanesborough Committees to Discuss School Funding
Shakespeare & Company Head 'Excited' for Future
Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (147)
Independent Investor (199)
Archives:
October 2014 (4)
October 2013 (2)
September 2014 (5)
August 2014 (7)
July 2014 (2)
June 2014 (6)
May 2014 (9)
April 2014 (8)
March 2014 (6)
February 2014 (6)
January 2014 (7)
December 2013 (8)
November 2013 (7)
Tags:
Federal Reserve Retirement Debt Jobs Interest Rates Commodities Election Stocks Debt Ceiling Markets Japan Rally Fiscal Cliff Economy Energy Stock Market Stimulus Oil Metals Taxes Europe Housing Pullback Euro Greece Recession Bailout Banks Currency Europe Selloff Deficit Fed Congress Crisis
Popular Entries:
The Independent Investor: Understanding the Foreclosure Scandal
The Independent Investor: Don't Fight the Fed
The Independent Investor: Does Cash Mean Currencies?
@theMarket: QE II Supports the Markets
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: How Will Wall Street II Play on Main Street?
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
Recent Entries:
@theMarket: Are We There Yet?
The Independent Investor: Why Is This Recovery Different?
@theMarket: October Starts Off on High Note
The Independent Investor: Money & Divorce — What You Should Know
@theMarket: Wash, Rinse and Repeat
The Independent Investor: Is Wall Street Responsible for Climate Change?
@theMarket: Waiting on the Fed
The Independent Investor: The United States of Scotland?
The Independent Investor: Europe Follows the U.S. lead
@theMarket: What's Up With Bonds?


View All
Football: Franklin Tech vs...
McCann Tech holds on for the win Saturday afternoon. McCann...
Colegrove Park Elementary...
Mayor Richard Alcombright and the City Council were updated...
Boys and Girls Cross Country
Berkshire Chamber Greylock
Boys and Girls Cross Country
The Lenox boys and girls teams both cleaned up on Senior...
Volleyball: St. Joe s vs...
Taconic takes 3 from St. Joseph Tuesday night.
Ramblefest 2014
Adams residents enjoyed entertainment, food, and locally...
Girls Soccer: Hoosac Valley...
The Wahconah girls soccer team on Monday advanced to an...
Berkshire County Classic Golf
Francois Benistand, an exchange student from the south of...
Indashio Fashion Show
Fashion designer Indashio holds his second FAME Festival in...
Football: Pittsfield vs...
Senior quarterback Nick Clayton marched his team 80 yards...
Football: Lee vs Drury
FINAL: Lee Wildcats beat Drury 24 -14.
Football: Taconic vs Hoosac...
FINAL: Hoosac Valley 51-14 over Taconic.
Soccer: Mount Greylock vs...
Eric Hirsch scored twice, and Taylor Carlough played strong...
Girls Soccer: Wahconah vs...
The Mount Greylock girls soccer team is still in search of...
Boys and Girls Cross Country
Hoosac Valley's Travis Ciempa and Mount Greylock's Margo...
Football: Franklin Tech vs...
McCann Tech holds on for the win Saturday afternoon. McCann...
Colegrove Park Elementary...
Mayor Richard Alcombright and the City Council were updated...
Boys and Girls Cross Country
Berkshire Chamber Greylock
Boys and Girls Cross Country
The Lenox boys and girls teams both cleaned up on Senior...
| Home | A & E | Business | Community News | Dining | Real Estate | Schools | Sports & Outdoors | Berkshires Weather | Weddings
Advertise | Recommend This Page | Help Contact Us | Privacy Policy| User Agreement
iBerkshires.com is owned and operated by: Boxcar Media 102 Main Street, North Adams, MA 01247 -- T. 413-663-3384 F.413-664-4251
© 2000 Boxcar Media LLC - All rights reserved