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The Economy Cannot Recover Because the Fed Damaged The Process of Wealth Creation

By: Steve Johnson

6/4/2012 - 0 Comments

Last week we saw the Q1 GDP get revised from 2.2% to 1.9% and with inflation running above 2% we are already in economic decline.  Q2 GPD is likely to be lower than Q1.

We also saw the May jobs numbers come in at 69,000 jobs, which is far lower than the 150,000 that many economists were hoping for.

What is going on?

We conclude that, contrary to Bernanke, his loose policies didn't save the US economy from anything.  The FED only delayed the massive recession that is still on the horizon.

The reason the economy cannot recover is because the FED has damaged the process of real wealth creation.

Bernanke's loose policies have helped to create another bubble at the expense of wealth creation and thereby setting course for continuous economic decline.

It looks like I was right in 2008 when I wrote my eBook “Why America May Never Recover From the Recession

How Wealth Is Created

Few politicians realize how wealth is created nor do they seem to care.  But they need to start, because their ideas are completely wrong. 

Wealth is created by entrepreneurs coupled with investors that have an opportunity to produce something valuable.

This can only happen when entrepreneurs are allowed to freely innovate without costly regulations that make it impossible for them to get started. 

And money needs to have value, so that investors have a reason to get involved and entrepreneurs have a reason to borrow it from them.

When interest rates are held at near zero by the FED, the government is not allowing this to happen. 

Over time, the longer the FED holds rates down the culture of entrepreneurs and investors are destroyed.  That is what has happen over the last several years. 

Because of the damage that low interest rates have caused to the culture of entrepreneurs and their partnering investors, it is going to take extra high interest rates and massive cuts to regulations to rebuild the damage that has been done before any new jobs are going to be created again.

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