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News Link • Federal Reserve

The Puppet Masters: Fed SOMA and The Economy

It’s mind boggling to me, just mind boggling, how nobody gets the simplicity of the pipeline from Ben Bernanke’s twisted brain to his henchmen the Primary Dealers, to the stock market and the economy. When the Fed pumps money into Primary Dealer trading accounts, they manipulate stock prices higher. When stock prices go up, the top 1% is wealthier (or feels that way, even if it is just a false facade with no foundation) and spends more. That boosts economic activity at the margin. The mechanism is direct and immediate. And it works both ways. When the Fed reduced the SOMA in 2007 and 2008 to fund its myriad emergency alphabet soup programs, it crashed the stock market and the economy.

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