THEN AND NOW

 
The idea that the Fed is out of bullets has little or nothing to do with whether the U.S. is already in a recession. That's one of the controversies making the economic rounds today.

Being out of bullets has more to do with being wrong than recessions. In fact, whether the economy is in a recession isn't even the correct question, notwithstanding Fed Chair Janet Yellen's upcoming semi-annual two-day appearance this week before Congress.

Things aren't good. And haven't been good for a long, long time. This year's presidential election is frank testimony of that. For the first time in a long time socialism's become an acceptable political public term in the country. That doesn't happen in a vacuum. And the Fed's easy-money-asset-bubble-creating policies has widened the economic gap between Americans.

The big benefactors have been big bankers and Wall Street, the same groups that shower money on these political candidates, left and right. Those who continue to push the bright side of the story are mostly the same ones who argued the Fed had the magic potion to make all the pain and suffering disappear. But like the famous Wizard of Oz, the Fed has been exposed for what it is--a group of groping bureaucrats hiding behind a not-so-transparent-quasi-government curtain.

Lower energy prices at the pump was touted as the magic manna for consumers and rekindling the flames of consumption in an already deeply indebted, overwrought consumer. It isn't, as consumers opted to drive more miles and save more. One of the largest segments of the population, baby boomers, are rapidly approaching the age of cleaning out their garages not piling them up with more junk. A good part of consumption is just another name for junk collecting.

Zero interest rates were to loosen up the lending reins. They haven't. What they engendered is more restrictions and regulation. And despite the positive twist many put on the recent jobs report, big U.S. firms, according to the WSJ, are laying off workers. Cutting costs is the latest corporate meme in light of a strong dollar and anemic growth, another form of divergence not so welcome for businesses and emerging markets.

Fixation has it's own definition. Right now it's spelled consumer, not just here but in China, Japan and Europe. It's the antithesis of hedging, diversification and spreading your eggs around. It also shows how arrogant, cocksure the Fed has been. Sales and profits for many of the S&P 500 companies are expected to be down.The FANG lost their fangs. If you're of an economic ilk, according to reports, this equals two consecutive quarters of declining earnings. And it's not just manufacturing and energy.

There's another pall hanging over those celebrated jobs numbers that for the most part gets ignored.
Laid off employees who over time worked their way via loyalty and performance into higher pay brackets are having difficulty finding work at similar pay owing to their salary history. Employers have options. Hiring younger workers with less experience willing to work for lower pay is just one of them.

All the cost cutting will eventually work it's way into the economy becoming a good thing. But that is then and this is now. What's needed, too, despite all the phony Keynesian rhetoric, is a lot more actual cost cutting at the government levels, local, state and federal. Waiting for that to happen anytime soon, however, you might want to give the economy a consumer boost by purchasing a respirator.