'The Fed is doubling down on what appears to be a failed policy, driving the economy to the brink of recession without bringing prices down appreciably... So why is the Fed forging ahead?'
, which is sucking out profits that should be going toward building more factories and other economic development.
By backstopping the financialized economy, the Fed has been instrumental in widening the income gap of the last two decades, pushing housing prices to heights that are unaffordable for first-time homebuyers, driving up rents and educational costs, and crushing entrepreneurs. DiMartino Booth explains:
Fed policy feeds passive investing… because you don't have to carefully allocate your resources. You simply have to be long the NASDAQ and sit there with your money. What does that feed? It feeds the monopolization of America. The largest companies, the companies such as Google and Microsoft… if there is a competitor in their world they simply absorb them. They acquire them, which quashes… the entrepreneurial spirit that made this country so great.
… [T]he trick here is for the Fed to not break anything big, and that's the delicate balancing act,… if… they can slowly, methodically take the rot out of the system without breaking anything big that forces them to pull back.Since the financial crisis, there's been a lot of private equity that's entered the space and snapped up all these homes and they're renting them… It's definitely exacerbated this housing cycle.
DiMartino Booth discusses the risk of derivatives contagion using the example of AIG, a giant insuranceDuring the financial crisis… we rescued AIG because we didn't want to actually see what it looked like on the other side of that cliff had derivatives actually been unwound, and what that contagion might have looked like.… We never tested the derivatives market, so that risk continues to lurk out there….
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