When the Fed starts tapering down its stimulus efforts

While Federal Reverse Chairman Ben Bernanke will soon leave his post, the world is waiting for the Fed to start tapering its so-called quantitative easing programs intended to provide stimulus to the US economy.  What will be most interesting is if the end of the program actually helps the US economy.

The Fed’s actions are macroscopic measures designed to drive overall growth of our economy.  Unfortunately, an economy built on policies geared toward financial capital, versus intellectual and/or labor capital, is an economy that will drive wealth into the pockets of those who hold the most financial capital, i.e. the already wealthy.  In other words, economic growth in our country is driving economic disparity instead of creating quality jobs and other opportunity to disperse the nation’s wealth, because these policies make investments in Main Street businesses less attractive.

Meanwhile, the Fed’s approach intentionally drives down the cost of borrowing, especially for banks, thus making loans to Main Street has become a poor investment, whereas, burrowing to fund stock purchases, or other financial instruments with greater performance, becomes far more lucrative.  Ripple effects like these only add to the macroscopic impact of the Fed’s actions.

If economic growth is truly driving income inequality, our country has a serious problem, even if the Fed’s efforts are halted, while corrupting the disparity could take decades thanks policies like disproportionately favorable tax rates for capital gains.  Wall Street is supposed to be a reflection of Main Street, not the driver of our economy.  Financial Services are only truly profitable when they are servicing the real money in the real economy; otherwise, they are simply distorting the value of wealth in their favor by driving up commodity and consumer prices in order to consume a far larger piece of the American pie. 

Consequently, the changes in Fed policies will most importantly offer America and the rest of the world a chance to better understand the impact of macroscopic policies that focus solely on growth.  What I think we need to learn is how to generate more growth on the microscopic level, i.e. within communities, to rebuild the Main Street economy.  This means focusing on how money flows throughout our economy and less on how much growth we see in terms of GDP and stock prices.