Sacrificing the Dollar for Stock Growth

By now you must realize that the economic environment we all see outside our office windows is not a free market reality. The government has taken control and will continue to manipulate anything it can to create the outcomes it seeks. It appears that the only thing the government wants is a rising DOW. It’s willing to sacrifice the dollar to keep stocks rising.

Since the media seem to focus primarily on this indicator of financial well-being, it may be the government’s method of attempting to control consumer sentiment.

After Standard & Poor’s downgraded US debt and the stock market fell into a tailspin, most would think that the government’s power to manipulate the markets had been reduced. Not so.

The next day, the FOMC announced that it would not be increasing interest rates until at least the middle of 2013. Dan Norcini provides the resulting impact in his blog:

That acknowledgement, namely, that growth is so sluggish, the economy so moribond and unemployment so chronically high, sent money flowing into BOTH stocks and bonds at the same time. How's that for a neat trick by the boyz at the Fed? Here is the deal - the FOMC is attempting to drive money out of bonds and INTO equities based on the fact that they have guaranteed practically no return as far as yields go on short term Treasuries for at least two years.

Norcini calls this just another form of currency debasement, “but in a manner in which it is not so obvious as they had just come out and said, ‘We are going to do a QE3’.”

In effect, the government’s actions have indicated that there will be no growth in our economy for at least another couple of years, rendering the yield on US Treasuries low.

It may be time to start asking who is gaining from these actions. It’s certainly not the American taxpayer.