1:08
The housing market was even weaker in October than expected.
Pending home sales, based on signed contracts to buy existing homes, fell 2.6 percent compared with September, for a year-over-year decline of 6.7 percent.
Last month, however, pending sales broke a long-streak of month-over-month declines. That flicker of hope for the housing market, which has been the weakest part of an otherwise very strong economy, was effectively extinguished by October’s data.
On a year-over-year basis, this gauge of the housing market has fallen for ten-months in a row.
The disappointing data on Thursday follows close on the heels of lower-than-expected new home sales data on Wednesday. These fell 12 percent year-over-year, according to the U.S. Census.
The decline in sales is largely blamed on a decline in affordability. Home prices are up by more than incomes and mortgage rates have climbed as the Fed hiked rates this year.
July 27,
2018
The Blue-State Housing
Bubble
Another housing bubble is beginning to
burst. Its financial characteristics are different from the 2007-8
housing bubble but it shares one thing in common -- that it is caused by
government policies.
The 2007 bubble was caused by the Federal
government insisting on home loan qualification standards changes. Buyers
who were not qualified to obtain traditional home loans were encouraged and
even subsidized to get loans in states such as IL, CA, NJ, PA, and all other
areas. The details of these changes were documented by Pinto and Wallison.
The bubble burst because the easy money
home loan qualification changes created two prongs of financial instability: 1)
persons who were not qualified were allowed to obtain mortgages and 2) the easy
money policies rapidly escalated home prices and placed many mortgage holders
underwater when the artificially high housing prices crashed.
This bubble now being created in the
biggest Blue states, while being driven by government policy, has a completely
different financial dynamic. This dynamic is best understood by looking
at the financial condition of Illinois.
The financial insolvency of Illinois is
directly linked to its public-sector pension system. The unfunded public
pension liability of the state is $251
billion. But that one fact is
only part of the story. In addition to having this unfunded pension
liability, the state now dedicates one-fourth of its annual state budget to
pension costs. In order to finance the ongoing demands of the public pension
system (Illinois has 650 pension plans throughout the state) the state seizes
state grant money and state funds lawfully appropriated to pay for public
services throughout the state and puts those into the pension fund located
in the state capital, Springfield. Since there are 4.8 million
households in Illinois the average household owes $52,269 to the unfunded
pension costs, and these go up every hour. And in addition to that
one-fourth of the Illinois state budget goes to pensions.
The amount of money the state has seized
from public services can be seen by the fact that in 2016 the state owed
vendors $15.9 billion and another $2.8
billionwas seized from funds
allocated to pay for health care vendors. This means the state literally
seizes lawfully appropriated funds from state-mandated health care programs such
as nursing homes and medication and places them in its pension fund.
Illinois has two state
statutes that allow the state to
seize both state grant money passed by the General Assembly allocated for state
grants and another statute that allows the pension fund to seize state
funds.
In addition to these seized state funds,
the Illinois Policy Institute, a watchdog group in Illinois, audited all
110-plus cities of Illinois and found that in the ten biggest cities, including
Chicago, all the property taxes people pay go only to pay pensions, not to fund
public services such as water and sewer, police and fire protection, and other
essential services.
The core issue then is whether the demand
for property-tax revenue made by the public pension plans will have an effect
on housing values, and if this effect will be strong enough to create a housing
bubble.
The best illustration of the current
housing bubble can be seen with a specific example. I know a person on
the northwest side of Chicago, a middle-class neighborhood, who recently
received, in his July 2018 property tax bill, a raise of $10,000 on his annual
tax payment. This was not a raise in the assessed value of his house,
this was a raise in the tax that is due. The house is 2,200 square feet
and since the owner now wants to sell the house, it was recently assessed as
having a fair market value of $348,000. Before this $10K property tax
increase, the property tax bill of the house was already at $13,800. So
if anyone wants to buy a house worth $348,000 they have to pay $1,983 per month
in property taxes. The mortgage will be about $1,350. per month, so the
total payment will be $3,333 a month for a house worth $348K. And each
year the property tax will only go up.
What this means is that anyone who buys this
house will already be paying a 7% property tax rate on the market value of the
house. That monthly property tax bill normally is for a house worth $1.2
million dollars at a 2% property tax rate. No matter how one looks at
this, it is foolish for a person to pay a property tax bill for a $348K house
when at a 2% tax rate they could have a house worth $1.2 million. While
this is a quick back-of-the-envelope financial analysis, the trend is clear:
Illinois has the highest tax burden of any state.
The Chicago
Federal Reserve bank should be
doing a precise analysis of this impending housing crisis, but instead recently
suggested a 43%
property tax hike.
This is the bubble: homeowners are losing
most, if not all, of the equity they have in their homes. And once again
it is being done by government. This time it is not the federal
government that is changing home mortgage loan lending standards but the
Illinois state pension fund that is literally seizing home equity value to pay
their pension demands. And while this is happening, Illinois wastes over
one billion dollars on
interest needed to service what
they've borrowed.
To understand how great the demand for tax
revenue is in Illinois consider the fact that the largest pensions go to
retirees from SURS the State University Retirement System. The actual
facts from Taxpayers
United show that of the 200 top
pensions going to university retirees, the lowest is $199,000 per year and the highest is
$581,000 a year. This is not a projection, this is the information from 2017.
To finance these pensions, young people who take out student loans are also
seeing a drop in their long-term incomes. The Illinois Policy Institute
reported that in Illinois public universities, half of the tuition
goes to pensions. So when
students graduate from an Illinois public university, half their monthly
student loan payment will go to extravagant pensions, and the voters of
Illinois have no say in these pensions.
This means these graduates have less money
to purchase a home. As a result, the young people in Illinois are the
largest age group that is fleeing the state. They see the writing on the wall
and cannot imagine they could ever afford a home and family in Illinois. More
than 80%
of Illinois counties saw population
losses in 2017.
The bubble is bursting right now in Illinois and in CA, PA, MA, CT, NJ,
NY, and all other big Blue states. California alone has a half-trillion-dollar
unfunded pension liability. The financial mechanicsDemocrats nominate Pelosi as House speaker, reelect top aides
29 November 2018
In a clear demonstration that the Democratic takeover of the House of Representatives will produce no significant shift in US capitalist politics, the House Democratic Caucus has reelected its three top leaders, 78-year-old Nancy Pelosi, 79-year-old Steny Hoyer and 78-year-old James Clyburn.
All three are indelibly associated with the right-wing record of the Democratic Party during its last period in control of the House of Representatives, from January 2007 to January 2011, when Pelosi was House speaker, Hoyer was majority leader and Clyburn was majority whip.
BLOG: WAR PROFITEER SEN. DIANNE FEINSTEIN IS A MAJOR DONOR TO ALL OF PELOSI'S CAMPAIGNS. IT DOES NOT MATTER WHO IS PRESIDENT, THEY ALL SERVE THE SAME PAYMASTERS ON WALL STREET.
During the first two years, with George W.
Bush in the White House, Pelosi and her two
top aides blocked any effort to impeach Bush
for the lies that paved the way for the war in
Iraq, while supporting full funding of the
murderous US military interventions in both
Iraq and Afghanistan. Pelosi has adopted a
similar stance in relation to a possible
impeachment of Donald Trump, whose
assault on the Constitution is even more
flagrant than that of Bush.
During the next two-year period, under the
Obama administration, the Pelosi-Hoyer-
Clyburn leadership spearheaded passage of
the reactionary Affordable Care Act, whose
purpose was to shift the cost of health care
from corporations and the government onto
the backs of working people; pushed through
the Dodd-Frank legislation, which gave a slap
on the wrist to the Wall Street criminals who
caused the 2008 financial crash; and lavishly
funded the US wars in Iraq and Afghanistan,
under Obama’s leadership, and the
expansion of drone warfare throughout the
Middle East and North Africa.
The Democrats were swept out of power in the House of Representatives in the 2010 elections, in large measure because of popular disappointment with the failure of the Obama administration to provide any serious remedy for the economic slump that followed the 2008 Wall Street crash. Obama and the Democrats bailed out Wall Street but pushed through wage cuts for auto workers and other sections of the working class.
After eight years in the minority, the Democrats recaptured a House majority in the November 6 elections. They were the entirely undeserving beneficiaries of the broad popular hostility to the Trump administration and the Republicans, which under the US political system can find no electoral expression except in a vote for the other half of the two-party duopoly, in this case, the equally right-wing and pro-corporate Democrats.
Wednesday’s caucus vote follows several weeks of maneuvering and horse-trading by the Democratic leadership, mainly involving small groups of representatives whose perspective and program is generally more right-wing than Pelosi’s. These include the Blue Dogs, a group of several dozen Democrats committed to fiscal austerity; the Problem-Solvers Caucus, a bipartisan group of 12 Democrats and 12 Republicans; and an informal “stop Pelosi” group spearheaded by Seth Moulton of Massachusetts, an Iraq War military officer, and Kathleen Rice, a former prosecutor from Long Island.
Pelosi met with Moulton, Rice and Representative Tim Ryan of Ohio, who ran against her in 2016 but declined to do so this year, just before the House Democratic caucus meeting. Moulton said afterwards that they pressed Pelosi to outline a “transition” in leadership—i.e., to announce that this would be her last term as Democratic leader—but she declined to do so.
By contrast, Pelosi had the full and unreserved support of Alexandria Ocasio-Cortez and Rashida Tlaib, the two newly elected representatives who claim membership in the Democratic Socialists of America, as well as other candidates hailed by the pseudo-left because of their racial or gender identities: Ayanna Pressley of Boston (the first African-American representative from Boston), Sharon Davids of Kansas City (the first Native American lesbian representative), Ilhan Omar of Minneapolis (along with Tlaib, the first Muslim woman representative), and so on.
In the caucus vote Wednesday, Pelosi prevailed easily, 203–32. The 32 votes against her were only half the 63 votes won by Ryan two years ago, when he challenged Pelosi for reelection as minority leader.
Pelosi was compelled to negotiate with the right-wing caucuses only because the speaker, unlike the majority leader or minority leader, is chosen by all 435 members of the House of Representatives, requiring 218 votes for election. The 203 votes she received in the caucus ballot was 15 votes short of the 218 she will need in January, when the new House session begins.
Many of those voting against Pelosi Wednesday had pledged to oppose her for speaker during their election campaigns, mainly to appease right-wing criticism of Pelosi’s supposed liberalism.
In an effort to secure the necessary votes for January, Pelosi crafted a cynical process for the caucus vote, allowing representatives to cast “no” votes against her even though she was the only candidate nominated, so they could cite the caucus vote as proof that they had honored their campaign promise.
Although the vote was supposedly by secret ballot, representatives who so desired were even encouraged to take selfies with their “no” votes so they could prove in future electoral campaigns that they had opposed Pelosi, even after they cast a vote for Pelosi in January, when the vote really counts.
As Politico wrote, summing up the cynical maneuvering: “The unusual move allows members from swing districts who ran on a platform of opposing Pelosi to say they did so when they return home. In fact, Pelosi allies have actually encouraged some members-elect to oppose her in caucus so they can tell constituents they tried to push her out of the job—and then back her during the more critical Jan. 3 floor vote to officially become speaker.”
For all other leadership positions no such elaborate pretenses were required, since a simple majority of the caucus decided the winner. Accordingly, for the other two top positions where there was only one candidate, House majority leader and House majority whip, Hoyer and Clyburn were elected by acclamation.
The lesser positions in the Democratic leadership were filled in part by acclamation and in part by contests. Ben Ray Luján of New Mexico, who headed the Democratic Congressional Campaign Committee, which oversaw the vetting and nomination of Democratic candidates—mainly to promote the most right-wing candidates, particularly those with a military-intelligence background—won the position of assistant majority leader, effectively the number four leadership position, without opposition.
In the contest for chairman of the Democratic Caucus, the number five position, Hakeem Jeffries of Brooklyn, New York, defeated Barbara Lee of Oakland, California, by 123–113. This was billed as a largely generational contest, since Jeffries is 48 and Lee, 72, and without political significance, since both are members of the Congressional Black Caucus and the Progressive Caucus. However, Lee was the only member of Congress to vote against the 2001 Authorization for Use of Military Force after the 9/11 attacks, which Bush cited as the legal basis for his invasion and occupation of Afghanistan. She also voted against the USA Patriot Act.
Pelosi coopted potential opponents by creating several new lower-level leadership positions for which they could run, including the assistant majority leader position set aside for Luján, and various subordinate positions on the Democratic Congressional Campaign Committee. Voting for these offices continued into Wednesday evening and perhaps into Thursday.
In another significant initiative, Michigan Representative-elect Elissa Slotkin, one of the two former CIA operatives elected as Democrats on November 6, drafted a letter to Pelosi on behalf of the incoming freshman class, which numbers 62 newly elected Democrats, asking the Democratic leadership to setaside positions on the powerful Appropriations, Rules, Ways and Means, Energy and Commerce, and Financial Services committees for new members. Slotkin also asked for two freshmen to be seated on the Steering and Policy Committee, which decides on committee assignments and sets legislative strategy.
THE CONSPIRACY TO SABOTAGE HOMELAND SECURITY
The Democrat Party’s secret agenda for wider open borders, more welfare for invading illegals, more jobs and free anything they illegally vote for…. All to destroy the two-party system and build the GLOBALISTS’ DEMOCRAT PARTY FOR WIDER OPEN BORDERS TO KEEP WAGES DEPRESSED.
https://mexicanoccupation.blogspot.com/2018/11/frontpage-hidden-agenda-of-pueblo-sin.html
Demonstrably and irrefutably the Democrat Party became the party whose principle objective is to thoroughly transform the nature of the American electorate by means of open borders and the mass, unchecked importation of illiterate third world peasants who will vote in overwhelming numbers for Democrats and their La Raza welfare state. FRONTPAGE MAG
GENERAL MOTORS DUMPS THOUSANDS OF WORKERS AND CLOSES PLANTS - Stockholders celebrate!
"It identifies socialism with proposals for mild social reform such as “Medicare for all,” raised and increasingly abandoned by a section of the Democratic Party. It cites Milton Friedman and Margaret Thatcher to promote the virtues of “economic freedom,” i.e., the unrestrained operation of the capitalist market, and to denounce all social reforms, business regulations, tax increases or anything else that impinges on the oligarchy’s self-enrichment."
“The yearly income of a typical US household dropped by a massive 12 percent, or $6,400, in the six years between 2007 and 2013. This is just one of the findings of the 2013 Federal Reserve Survey of Consumer Finances released Thursday, which documentsa sharp decline in working class living standards and a further concentration of wealth in the hands of the rich and the super-rich.”
"The American phenomenon of record stock values fueling an ever greater concentration of wealth at the very top of society, while the economy is starved of productive investment, the social infrastructure crumbles, and working class living standards are driven down by entrenched unemployment, wage-cutting and government austerity policies, is part of a broader global process."
"A defining expression of this crisis is the dominance of financial speculation and parasitism, to the point where a narrow international financial aristocracy plunders society’s resources in order to further enrich itself."
BEL AIR MAXINE WATERS AND HER CRACK ALLEY CONSTITUENTS
WALL STREET BANKSTERS AND THEIR BOUGHT DEMOCRAT POLS PREPARE FOR THE NEXT WAVE OF BOTTOMLESS NO-STRING BANKSTER BAILOUTS…
Will this one finish off the American economy?
Considering her record and documented history of poor ethical and moral fitness, it’s outrageous that Maxine Waters is up for chair of the ultra-powerful House Financial Services Committee, which has jurisdiction over the country’s banking system, economy, housing, and insurance.
"Wall Street billionaires are pushing a new
plan to swipe the profits of Fannie Mae and
Freddie Mac from U.S. taxpayers–and in the
process revive the system of privatized-profits
and public-risk that contributed to the severity
of the Great Financial Crisis."
The Moelis plan stands out as a strikingly bold grab for control of the companies and their profits. It calls for the dividend payments to the Treasury to cease so that the companies can rebuild capital. Shockingly, it also calls for the cancellation of the senior preferred stock altogether–with no compensation for the past risk and future profits currently due to taxpayers. It is as if a company proposed to do a stock buyback by proposing to cancel its shares rather than purchasing them for cash.
So will Maxine Waters be the crusading financial protector of our 401k plans and save America from the next financial bubble? Well, there will certainly be lots of harassment and shakedowns. But don't count on her steering us clear of Wall Street excesses. If history is any guide, Mad Maxine will be way too busy raising money from the people she is now in charge of regulating. Stephen Moore is a senior fellow at The Heritage Foundation
Waters, who represents some of Los Angeles’ poorest inner-city neighborhoods, has also helped family members make more than $1 million through business ventures with companies and causes that she has helped, according to her hometown newspaper. While she and her relatives get richer (she lives in a $4.5 million Los Angeles mansion), her constituents get poorer. JUDICIAL WATCH
VIVA LA RAZA SUPREMACY, WIDER OPEN BORDERS, CHAIN MIGRATION, NO LEGAL NEED APPLY and BILLIONS IN WELFARE TO KEEP THEM CRAWLING OVER OUR BORDERS???
DEMOCRAT PARTY CORRUPTION
"This is how they will destroy America from within. The leftist billionaires who orchestrate these plans are wealthy. Those tasked with representing us in Congress will never be exposed to the cost of the invasion of millions of migrants. They have nothing but contempt for those of us who must endure the consequences of our communities being intruded upon by gang members, drug dealers and human traffickers. These people have no intention of becoming Americans; like the Democrats who welcome them, they have contempt for us." PATRICIA McCARTHY
THE INVASION SPONSORED BY THE DEMOCRAT PARTY
Congressional Democrats are apparently fine with catch-and-release policies because they see the likely electoral benefits. According to Customs and Border Protection (CPB), of the 94,285 Central American family units apprehended last year, 99 percent of them remain in the country today. CPB also reports that 98 percent of the 31,754 unaccompanied minors from the Northern Triangle of Central America remain in the country. CAL THOMAS
THE (REALITY) OF THE GLOBALIST DEMOCRAT PARTY AS IT SERVES THE RICH:
Anti-Semitic, open borders for cheaper labor and funded by criminal banksters… and these pols are making vast fortunes sucking the blood of America!
We must not let them cheat their way to power over the rest of us. Their ongoing vote fraud must be stopped and the Democrats need to take a look at themselves and at what they have become. It's not a pretty picture. What they have become threatens to destroy the greatest nation on the planet and they are doing it on purpose. They have nothing but contempt for the US as founded and for those of us who love this country. PATRICIA McCARTHY – AMERICAN THINKER
“Then we suffered the rattling election of Barack Obama, whose active membership in a white-, Jewish-, and America-hating church was well known to the electorate. His close personal relationship with the likes of his adored Rev. Jeremiah Wright and Louis Farrakhan was no secret. Obama was open about his goals. He told us he was out to "fundamentally transform America" and the world.” ALAN BERGSTEIN
“There is a deep racist and anti-Semitic disease in the leadership of the Democrats. As Senator Cory Booker brings his hatred for the Jewish State to the Senate, he should be asked whether he agrees with his hero, “The only good Zionist is a dead Zionist we must take a lesson from Hitler”. DANIEL GREENFIELD
DIANNE FEINSTEIN’S FIRES:
This is what crony capitalism gives you!
"In fact, the destruction has again exposed the criminal indifference and negligence of the ruling class and both its political parties, Democrat and Republican. Social infrastructure, including fire departments, have been starved of funds for decades as trillions of dollars have been funneled into the bank accounts of the rich."
WHY DID THE FIRST LADY OF CORRUPTION and AMERICA’S
GREATEST WAR PROFITEER SENATOR DIANNE FEINSTEIN and her cronies PACIFIC GAS & ELECTRIC BURN DOWN MEXIFORNIA?
CALIFORNIA BURNS …. Again!
The Mexican welfare state under the weight of corruption and staggering cost of the LA RAZA welfare state on their legals’ backs!
"In fact, the destruction has again exposed the criminal indifference and negligence of the ruling class and both its political parties, Democrat and Republican. Social infrastructure, including fire departments, have been starved of funds for decades as trillions of dollars have been funneled into the bank accounts of the rich."
The Dollar Dearth and the U.S. Economy
With signs of economic weakness popping up everywhere, the Federal Reserve has come under increasing pressure to slow down the pace of interest rate hikes. The Fed has hiked rates six times since President Trump took office and is on track to up the pinch point again in December. The Fed’s interest rate policy has long been material for financial new headlines, but it is only part of the current cycle of monetary tightening. Another part is the admittedly wonkish issue of reducing the Fed’s balance sheet. Policymakers should give it more prominence because it is siphoning billions of dollars out of the economy. Some analysts go so far as to say that, coupled with interest-rate hikes, it could tip the U.S. into recession.
Today the Federal Reserve owns some $4.1 trillion in financial assets, most of which are intermediate-term U.S. Treasury bonds of five to seven years maturity, but it also shows $1.6 trillion in mortgage-backed securities on its books. The Fed acquired this stash during the global financial crisis and its aftermath. In the period 2008-14, the Federal Reserve periodically made large-scale security purchases from its primary dealers. We can thank the Fed for that move, since by many accounts it averted another Great Depression.
Collectively, this process was known as “quantitative easing.” It gave the Fed a way of injecting liquidity directly into the economy without waiting for the slower and more indirect effect of near-zero interest rates. Accordingly, the primary dealers sold securities to the Fed, and in exchange, their accounts at the Federal Reserve were credited money. These transactions were an exercise in money creation. Trillions of dollars thus came into existence and entered the economy.
In principle the Fed could sell off its assets, but selling a bond portfolio in the trillions of dollars could disrupt the markets. So in late 2017 the Fed announced it would just let the bonds run to their maturity dates and would not use any proceeds to buy new bonds. When any bond matures, the owner receives its face value in cash from the issuer. The Fed is presently receiving about $50 billion a month from the U.S. Treasury for bonds reaching maturity.
Whenever any of its bonds reaches maturity, the Fed simply removes it from its balance sheet, and the money paid at maturation by the Treasury Department is extinguished. The Fed makes those dollars go out of existence. So far billions of dollars have been taken out of the economy, at a pace of $600 billion a year.
The process of reducing the balance sheet is the mirror image of the Fed’s acquisition of assets in 2008-14. Today the Fed wants to get its balance sheet down to fighting weight so that it could move into action should a future contingency arise calling for another round of quantitative easing. The Fed describes this process as “balance sheet normalization,” but outside observers more commonly refer to it as “quantitative tightening,” or QT, because it results in draining liquidity from the economy.
Some observers say that QT is compounding the contractionary effect of the Fed’s interest rate hikes. Ben Steil and Benjamin Della Rocca of the Council on Foreign Relations estimate that by the end of 2019 QT will have the effect of adding 2.2 percent to interest rates. The implication is that if the Fed achieves its goal of pegging short-term rates at about 3 percent, the economic environment would sense those rates as though they were actually 5.2 percent. This projection is grounds for concern about a recession.
The Federal Reserve does not consider its drawdown of assets as a tool of monetary policy. That may be so, and it should be said that the Fed is acting prudently in seeking to address the legacy resultants of its market interventions during the period of quantitative easing. Nonetheless, the Fed mischaracterizes balance sheet normalization. If during 2008-14 the Fed acquired trillions of dollars worth of assets explicitly for the purpose of injecting liquidity into the economy, in what way does the offloading of the same assets not affect that liquidity, but only in the opposite direction? To an outside observer, balance sheet normalization looks suspiciously like a monetary tool in everything but name.
Instead of thinking of QT as something that goes on behind the scenes, like a computer program running in the background while the interest rate story plays out on the active screen, bring it forward for a moment and take another look around. When we take QT as an element of monetary policy, we begin to see current economic conditions in a different light. With QT up front we are better able to explain the recent deflationary trends in commodity prices, and we can get a different perspective of why the housing industry is soft and why equity prices have tanked. If we take QT and interest rates together as reinforcing moves, we get a fuller appreciation of the monetary forces at work that point to slower economic growth ahead and possible recessionary conditions.
Today the U.S. economy is suffering from a dollar dearth. In putting its own balance sheet on a weight-loss regime, the Fed has also put the economy on a dollar-restricted diet. The Fed’s drawdown of its assets is siphoning billions of dollars out of the economy. This does not mean the money supply is shrinking, but it does mean that balance sheet normalization dampens its growth. This would be seen more clearly if QT were brought forward and its implications explored more explicitly.
Here’s the dilemma: if the Fed continues to raise interest rates and to reduce its balance sheet, it will tip the U.S. into recession. But if it pauses on interest rates, it would also have to pause on reducing its balance sheet, for to do the one without the other would be incoherent. A slower pace on the asset drawdown means the Fed would roll over all or part of the funds it receives when bonds mature into buying new bonds. The Fed would be back in the asset-buying business again, not necessarily as a rerun of the 2008-14 quantitative easing, but such a move could give rise to an inflationary mess.
Nonetheless, if economic conditions continue to weaken, and if Wall Street feels more pain, the Fed may have to opt for some kind of a double pause on interest rates and on balance sheet normalization. A carefully calibrated policy to reinflate may be unavoidable.
One way to do this would be to use a commodity-based index to gauge the amount of dollars demanded by the economy, and to adjust interest rates and the asset drawdown accordingly. Using gold as a proxy, the Fed should try to raise its price to a range within several of its long-term averages. Right now, the price of gold is below those averages. It is saying the markets need more dollars. The Federal Reserve should be injecting, not draining, liquidity from the economy.
James Soriano is a retired Foreign Service Officer.
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