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The Elliot Wave Theorist
recently published an essay by Robert Prechter which explored a curious phenomenon:
Since A.D. 2008, the Federal Reserve has paid $2 trillion dollars into the economy in order to: avoid a recession or depression, inflate the money supply, and thereby “stimulate” the economy back to recovery and robust health. Strangely, while that $2 trillion has apparently prevented an economic depression, it hasn’t caused an economic recovery. Despite the added $2 trillion, our economy is more-or-less right where it was back about A.D. 2008.
The Fed didn’t get much bang for its bucks.
How could $2 trillion in “stimulus” cause in so little stimulation?
The Elliot Wave article explained, in part, that the Fed’s $2 trillion was paid to Wall Street banks in return for “toxic assets” previously held by the banks. The banks were supposed to lend that $2 trillion to customers and thereby stimulate the economy. However, the American public didn’t want to go deeper into debt, refused to borrow that currency, and so the $2 trillion (most of it) simply sat in the bank vaults, leaving the economy largely “un-stimulated”.
I don’t doubt that public reluctance to go deeper into debt after A.D.2008 was at least part of the reason we’ve not yet seen significant inflation or an economic recovery. The banks can’t make the public borrow. But I suspect there may be another reason that, so far, has been generally overlooked: Maybe the Wall Street banks couldn’t lend the $2 trillion to the public.
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