Stock Market Over 85 Years - Has the Fed Produced Any Benefits?

By: EWI

By Robert Prechter

Has the Fed Produced Any Benefits?
The Fed has benefited the government mightily. Its exchange of new accounting units for the Treasury’s bonds has stealthily transferred value from savers’ accounts to the government. In conjunction with the FDIC, it has also benefitted bankers in the short run by allowing them to make profits on reckless loans and avoid accountability. But in doing so it has sucked value out of savers’ accounts and burdened the American economy.

Figure 1 is a remarkable chart that compares two back-to-back centuries. From 1813 to 1913, a period of 100 years when the Fed did not exist, the value of top U.S. corporations (normalized to the DJIA) rose from 0.18 ounces of gold to 2.86 ounces of gold, a 1489% gain in 100 years. From 1913 to 2013, a period of 100 years when the Fed has existed, the value of top U.S. corporations (as measured by the DJIA) rose from 2.86 ounces of gold to its current level of 11.86 ounces of gold, a 314% gain in 100 years. On this basis, we can calculate the burden of the Fed as being about 80% of the otherwise gain in the U.S. economy.

But this is the most positive spin one can put on the matter. It took some time for the Fed to get its operations going. If we extend the non-Fed era to 1929, erring slightly in the other direction, we find that the value of top U.S. corporations rose from 0.18 ounces of gold to 18.5 ounces, a difference of more than +10,000% in 115 years. In the 85 years since then, the value of top U.S. corporations has fallen from 18.5 ounces of gold to 11.86 ounces, a difference of -35.8% . On this basis, we can calculate the burden of the Fed as having extracted so much value out of the U.S. economy that it has gone into retreat.

The Era of Money vs. the Era of Unbacked Accounting Units

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This was only a small excerpt from Prechter's full 10 page report that you can access for FREE that includes additional sections such as -

1. Who is perpetrating the theft of your money
2. How they are doing it so you barely notice
3. Why it matters to you and your portfolio right now
4. How a market professional who's been around the block a few times expects it to play out in the immediate future -- so that you can protect yourself and even prosper now, as well as when the government's secret strategy inevitably crumbles and comes to light

You can get the whole story when you download Prechter's full 10-page FREE report here.

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About the Publisher, Elliott Wave International
Founded in 1979 by Robert R. Prechter Jr., Elliott Wave International (EWI) is the world's largest market forecasting firm. Its staff of full-time analysts provides 24-hour-a-day market analysis to institutional and private investors around the world.

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