WHY HAVE FED FISCAL POLICIES BEEN A DISASTER FOR THE DOLLAR
The fed fiscal policies have been a disaster for the dollar. Lets look at QE3 operation twist. The fed sells 3/7 year short term securities and buys 10/30 year long term securities. The long term security yield drops giving cheaper credit for large banks, state and local municipalities, and large corporations. Unemployment remains high and growth does not stimulate. The fed will probably modify its policy by removing yield incentives that pay banks to deposit money in reserves; the fed raise the reserve requirements for banks; the fed sets a maximum yield rate on 10 year treasuries. The stock market becomes the vehicle for transmitting fed policy. The stock market divergence form the mean is painful. The stock price diverges away from stock earnings, the conservative and proven method of valuating price. As a result, money is hot and any sign of fiscal policy will swing the stock market violently. Based on the 10 or so year of speculative divergence, it is very probable that another 10 to 15 years of deflated stock market price is pending, if not all ready in progress.[Learn More ...]
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