The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates
The best and worst part of cooking up some popcorn on a Coleman is, of course, the anticipation. That period of time between popping off the circular cardboard cover and placing it over the stove to the point the popping slows to a crawl and debate ensues around who will puncture the foil to release the built-in steam and smell of what is to come.
|As mentioned before, we are now in the beginning stages of the popping sequence with barely perceptible protrusions in the foil. Our government overseers, like tossled-hair toddlers, are standing impatiently around the campfire trying their best to quicken the popping pace of the economy.
But while most of them bicker and argue within the halls of Congress, only one - Fed Chairman Ben Bernanke - is truly doing anything to turn up the heat.
In fact, that is exactly what he is doing - or thinks he is doing - each month when the Fed purchases $85 billion of Treasuries and mortgages. And it's not just quantitative easing that Ben is pursuing. He has already exhausted all traditional Fed tools - or more correctly the only traditional tool - by driving interest rates to zero.
So, with yields at zero and stock prices perched at all-time highs, the theory goes, investors will look elsewhere to place their hard-earned cash.
The hope is that would-be securities investors will divert such activity to capital expenditures, driving real activity that creates jobs leading to a more robust consumer who will help pull the economy forward.
Additionally, there is an unmentionable hope that some of those investors make a complete conversion to become spenders instead of savers. After all, until a consumer base develops elsewhere in the world, consumption is the one and only driver of our economic activity - let's not forget that!
So, by taking rates to zero Ben has turned up the dial on the stove to 10. And then, following Spinal Tap's lead, gone to 11 by using QE.
Unfortunately, today's world of "unknown unknowns" is reinforcing the foil that holds the popcorn in. In a twist, the popcorn of the economy actually has a choice. Transactors in the economy can either engage as the Fed desires, or they can withstand the heat of low, but known returns.
And seeing the strength of the foil above, it has chosen to suffer Bernanke's 11-style heat source instead of popping into an impenetrable barrier above. No matter, it seems, how much Ben turns up the heat, the economy simply will not pop.
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