The growth in money supply is very strong, both in M2 and MZM, both broad measures of overall supply, each with a differing emphasis on duration. Both are growing at around 7 percent year over year. This is certainly in excess of the GDP, and the growth of consumer loans and bank credit, which is only growing at 2.5 percent year over year.
What is particularly disturbing is that the growth rate of real disposable income at this late stage of The Recovery™ is sub one percent, even as corporate profits, cash levels, and executive pay return to stratospheric levels for the large multinationals with large cadres of lobbyists and significant political influence through the revolving door.
I am not saying this is solely a Federal Reserve driven policy error. Not at all.
Quite a bit of it is being driven by fiscal policy, and specifically by the Congress and a Wall Street friendly Administration. This is not a New Deal, it is the Raw Deal.
But the failure of the Fed to act aggressively in conjunction with other regulatory agencies to reform the financial system, given the additional powers as regulator which they actively sought in the aftermath of the financial crisis for which they were a primary contributor, makes them equally culpable for the folly of this 'trickle down' approach. And the 'hands off, see no evil' approach to widespread financial fraud and abuse that continues even today.
There is a credibility trap at work, that prevents those in leadership positions from addressing the real problems frankly and honestly. They will attempt to shift the blame and the pain to the people, but with the pay and privilege of leadership comes responsibilities and obligations, what at another time would have been lumped together as 'honor.'
Oaths and the highest principles of the land are just pieces of paper, not allowed to stand in the way of the personal god of the day, gettin' paid.
And I think that the ruling elite have lost all sight and sense of the consequences of this in a frenzy of personal advancement and enrichment.
This is neither sustainable nor decent, and will not end well.
"I believe we have a crisis of values that is extremely deep, because the regulations and the legal structures need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I'm going to put it very bluntly. I regard the moral environment as pathological. And I'm talking about the human interactions that I have. I've not seen anything like this, not felt it so palpably.
These people are out to make billions of dollars, and [think] nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people [or] counterparties in transactions.
They are tough, greedy, aggressive, and feel absolutely out of control, in a quite literal sense. And they have gamed the system to a remarkable extent and they have a docile president, a docile White House and a docile regulatory system that absolutely can't find its voice. It's terrified of these companies.
If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I'm afraid to say... both parties are up to their necks in this.
...But what it has led to is a sense of impunity that is really stunning, and you feel it on the individual level right now. And it's very very unhealthy. I have waited for four years, five years now, to see one figure on Wall Street speak in a moral language.
And I've have not seen it once. And that is shocking to me. And if they won't, I've waited for a judge, for our president, for somebody, and it hasn't happened. And by the way it's not going to happen any time soon, it seems."
Jeffrey Sachs, Address By Video to a Conference At the Philadelphia Fed, April 2013