Is This a Self-Sustaining Recovery or As Good As It Gets?

Is This a Self-Sustaining Recovery or As Good As It Gets?

July 3, 2014

by Charles Hugh Smith

The reality is that nothing has been done to address the structural rot at the heart of the U.S. economy.

Opinions about the U.S. economy boil down to two views: 1) the recovery is now self-sustaining, meaning that the Federal Reserve can taper and end its unprecedented interventions without hurting growth, or 2) the current uptick in auto sales, new jobs, housing sales, etc. is as good as it gets, and the weak recovery unravels from here

Believers in the self-sustaining recovery have multiple data they can point to: the aforementioned auto and housing sales, and a number of other upticks in fundamentals such as jobs, household income, industrial production and so on.

The basic dynamic in this story is the Federal Reserve had to shoot the patient full of monetary heroin
(free money to financiers, zero interest rates, quantitative easing, unlimited liquidity not just to financiers but foreign banks, etc.) to stabilize the patient (the U.S. economy), but now that the patient has been restored to health via the monetary heroin addiction, the heroin can now be slowly tapered and the patient will not experience cold turkey withdrawal symptoms.

Though it is never stated openly, this is a precise replay of Japan's monetary policies, only on a grander scale. The Fed's leadership (Ben Bernanke, Janet Yellen et al.) concluded that the Japanese had failed to revive their dysfunctional economy because the monetary heroin doses they injected weren't large enough.

So the Fed upped the ante and injected unlimited quantities of monetary heroin into the U.S. (and thus the global) financial system.

http://www.oftwominds.com/blogjuly14/good-as-gets7-14.html