The Fed’s Dependence On The Consumer Will Backfire

By Tyler Durden

Via C.Jay Engel of The Mises Institute,

The story is that it is consumers that are going “to push the economy to grow more than 2 percent this year.” That’s Dallas Fed President Robert Kaplan’s recently expressed view. It’s the old fallacy of spending — rather than saving — our way into growth.

It’s remarkable that no one talks about the fact that the economy since 2008 was built on little but cheap debt, and therefore depends on the continued flow of such debt.

To raise interest rates in that environment, will lead to the very conditions that the Fed fears the most. Of course, Austrians would praise such a blessed blow to the artificial boom. However, since the Fed, operating through a Keynesian lens, sees no inherent instability in such an economic environment. They don’t see how much this would severely undermine the alleged stability they think they’ve achieved.

Kaplan and the rest of them are depending on indebted consumers, exhausted by their credit levels, to push the economy all the way up to 2 percent growth. That it’s come down to this speaks volumes about the Fed’s alleged success over the years. Aside from the terrible labor …read more

Source:: ZeroHedge