Janet Yellen chaired her first Fed meeting this past week. Afterwards she announced Fed policy going forward regarding her baby, quantitative easing. She helped construct QE at the height of the economic downturn several years ago, a topic written about repeatedly on this website. Yellen announced that QE will continue to taper down at a rate of $10 billion per month until the end of the year.
That is good, QE needs to end, the sooner the better. The problem is the economy has become somewhat dependant on it. The markets took a small but sudden dive at just the announcement about anything QE related. Yellen also said that QE coming to a total end will depend partially on unemployment numbers.
If you haven’t noticed the unemployment problem is a deeper wound in the economy and in the country not seen since the Great Depression. Not only are a huge number of people out of work, but even more are underemployed and wages have been stagnant for over a decade. When the markets react negatively to even the mention of QE ending, which it does every time there is an official announcement on the subject, employment numbers are likely to take a hit.
Why? Because the 1% who employ the other 99 have their assets all up in the casino stock market. So if/when those numbers go down unemployment goes up, underemployment goes up, wages stay stagnant or go down. So tying QE to the employment numbers is an out to keep QE going indefinitely since the unemployment crisis could be indefinite. What will the effect of a possible government mandated rise of the minimum wage? All these moving parts will affect whether QE ultimately comes to an end.
The minimum wage debate will be the subject of the next Excess and Algorithms article.