Janet Yellen's Next Big Idea: Use Fed Money to Pump Stocks Directly


Janet Yellen's Next Big Idea: Use Fed Money to Pump Stocks Directly

In the decade since the Global Financial Crisis, we’ve seen all sorts of schemes designed to show that everything’s really OK. Bail-outs, bail-ins, quantitative easing, zero and negative interest rates, even hints at helicopter money. The U.S. Federal Reserve’s latest thought-bubble is buying shares on the stock market. All these plans have one big things in common, though — more government influence and central planning in the economy.

Also read: As the Global Economy Falters, Bitcoin Offers an Alternative for Prosperity

Central Planning: Not Even Once

Venezuela socialism

There’s very little empirical evidence that more government intervention in the economy improves anything. In fact, plenty of historic and current examples prove the opposite.

Still, the general public accepts more and more of these big-government plans with little complaint. This time it’ll work, the promise goes. And the government gets bigger.

The world economy in 2016 has one advantage though — there are alternatives outside the system. With the advent of Bitcoin and cryptocurrencies, people can engage in international commerce with no government involvement at all.

The Fed Enters the Stock Market?

Federal Reserve Chair Janet Yellen hinted last week that the bank could start buying company shares in future.

Fed Janet Yellen Stockmarket
Janet Yellen

We should note that this isn’t a formal policy yet, and currently the Fed isn’t legally allowed to buy stocks. But Fed chief’s words carry weight, like Ben Bernanke’s 2002 reference to a “helicopter drop” of money. Any suggestion they make enters mainstream discussion.

In fact, the Swiss and Japanese central banks already buy equities. The Bank of Japan, in between printing trillions of new yen, also became a top 10 shareholder in about 90 percent of companies in the Nikkei 225 Stock Average.

Even mainstream media market commentators seemed nervous at Yellen’s stockmarket suggestion. Such intervention would not boost the real economy and suggests the Fed is nearly “out of bullets”, said CNBC’s pundits.

Government Won’t Fix the Economy, Look Outside the System

All this comes amid increasing calls to phase out physical cash. These calls should make us all nervous. While academics say crime-fighting is the main motive, in reality it’s about removing spending control from ordinary people’s hands. No cash, no bank runs. Why are there bank runs? Because people trust themselves with their money more than banks or governments.

Bitcoin LogoCentral economic planning doesn’t work, because the planners don’t have access to accurate price information. They use bad macro-level information to make bad decisions affecting micro-economies, which then fail. Only private businesses and individual spenders know what a good or service is worth, at any given time.

But if those planners want to deny you the power to spend your money? Then it’s time to look outside their system. Bitcoin gives you the ability to do just that — download a mobile wallet, ask people to pay you in bitcoin, and ask to pay others in bitcoin.

Hopefully it won’t take another national bankruptcy or banking crisis for people to understand this, but for most it probably will. And eventually, our economies will catch up with the cans our central planners are kicking down the road. With Bitcoin, though, you can get a head start — on an escape.

Is Bitcoin a viable alternative to the government-controlled economy? Do you use it for some other reason? Let us know.

Images via Shutterstock, Pixabay

Tags in this story
Bank of Japan, Central Banks, Federal Resereve, Janet Yellen, Stock Markets, Switerland

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Jon Southurst

Jon Southurst has been interested in bitcoin since reading Neal Stephenson's 'Cryptonomicon' in 2012. A long-time tech writer, he has been a regular contributor at CoinDesk and has written for Kaiko.com, DeepDotWeb and ancient print publications. He lives on an artificial island in Tokyo.

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