Revenues, Earnings and the FED
Headlines today point to weak durable goods numbers with one exception (ex aircraft which the top 3 percent predominately fly personally and the bottom 97 percent use to get their Amazon orders filled) . Corporations that sell products that don’t fly well might take heed, ie: CAT and McD. The whole question during this artificial QE based economic bounce since 2011 has been: why doesn’t the money momentum flow towards employment? A probable easy answer, the bounce is built on a weak foundation so corporations continue to squeeze and buy back shares rather than grow. Now a new question is developing: with revenues on the weak side and appearing ready to really weaken, how does the Fed get employment recharged.
There is probably no real answer available today, the time when something would have worked has passed. The real problem is that no one in Washington is really ready to call a spade a spade and deal with the economic facts, not Obama, not Congressional Democrats, not Congressional Republicans, least of all the FED who bows to all the craziness. The employment problem is one that only has a fiscal anwer, not a FED answer. The fact that stimulus in the 2009 to 2011 initial bounce went to the big money that had become overextended and blindly stupid in the 2003 to 2008 period, rather than either structuring a massive infrastructure stimulus to provide jobs or, even better maybe, to have allowed market forces to settle the matter is the central question.
Now the game has moved to selecting a new FED Chairman. The three names pondered by the Obama administration, Yellen, Summers, and Geithner, are all politically attached to the Administration. Getting a real neutral strong force to head the FED is the only way that the FED will survive. Obama’s selection, Yellen, is a good economist whose ideas may have worked in 2009, …2014 is too late. Ironically, the only name that comes to mind for me is Paul Volcker, he or if there is someone like him who exists, could stand up to the Administration and Congress and make the tough decisions. What has to be said first is that all that has happened since 2011 QE2 is that big money has been deleveraged of hard to sell assets with the assets being absorbed by funny money at the FED. Working this out will be the job of a super-person.