The video that brings down the Fed

"The Plumber is Clearly smarter than The Ben Bernanke"

t is a bizarre notion that a credit crisis can be solved by bailing out lenders while doing nothing about the obligations on the borrower side. Think about it - what we have said to lenders is, here you have these homeowners who can't pay for their houses. Foreclose on them, sell the homes at half the price, and the public will make you whole (largely through Treasury bailouts to Fannie and Freddie, made necessary by Federal Reserve purchases of these securities).

Heck, if the public is going to be on the hook anyway, at least notice that at equivalent cost to the public, the mortgage could simply be written down to half its value, with the homeowner now able to pay the balance off and the lender getting the public handout to make up the difference. But of course, that would reward the homeowner. So instead, we simply make the lenders whole while people lose their homes and foreclosure investors flip the homes at a profit in return for providing liquidity at the auction. That way, the same amount of public funds can be spent through the back door without Congress even getting involved.

Memo to Ben Bernanke - throwing money out of helicopters isn't monetary policy. It's fiscal policy. How is this not clear?

http://www.hussmanfunds.com/wmc/wmc101115.htm

When I first saw this video YOUTUBE reported around 200 hits, its now over 500,000.
If that's not the definition of going viral I don't know what is.

So what?

http://www.ritholtz.com/blog/2010/11/wealth-effect-greatly-exaggerated/

The rule of thumb has been that for every one dollar increase in a household’s net equity wealth, spending increased 2-4 cents. For residential RE, the increase is even greater: Consumer spending increases 9-15 cents (depending upon the study you use) for every dollar of capital gain.

The problem is, the theory is its mostly nonsense.

I make this statement for two reasons: 1) the distribution of equities in the United States; and b) the classic causation/correlation issue.

Let’s start with equity ownership. The vast majority of Americans have a rather modest sum of cash tied up in equities. 401ks, IRAs, investment accounts — these are primarily the province of the well off. Ownership of equities is heavily concentrated in the hands of the wealthiest Americans. Start with the top 1%: They own about 38% of the stocks (by value) in the US. The next 19% owns almost 53%. That leaves the remaining 80% of American families with less than 10% stake in the stock market (See Federal Reserve’s Z.1 Flow of Funds report for the most recent info).

How is THAT going to cause a wealth effect? Especially when you consider the median family’s stock portfolio is worth well under $50k. These are the millions of families who are the principle consumers of cars, food, clothing, electronics, energy, health care, etc. To them, a rising stock market is nearly meaningless.

Almost 2,000,000 hits