Kevin Spires, CFA, FRM
hattip to zerohedge.com

In an article on the "so-called" Wealth Effect, Chris Casey of the Mises Institute lays bare the lack of logic behind one of the greatest fallicies in modern Economics.

As Casey quotes, the wealth effect is where:
 
"Higher equity prices will boost consumer wealth and help increase
confidence, which can spur spending. — Ben Bernanke, 2010[1]

In other words, higher equity market prices lead to greater shorter term economic growth - and hopefully greater longer term economic growth.  Casey persuasively argues that monetary and fiscal policies that induce more spending in the short run (and less savings) do not help but rather harm the economy - especially past the initial boom in equity prices.

Personally, I think the Federal Reserve can't be seen to do nothing during an economic downturn.  If they did nothing and the economy recovered on its own their game would be up - which I think is basically that of the Wizard of Oz - all sound, fury, and action - but no actual magic and which makes the situation worse in the long run.

Kevin Spires, CFA, FRM

Business Insider has an article by Advisor Perspective's Robert Huebscher giving David Rosenberg's outlook on the odds of a recession over the next year or two.  The best quote is Rosenberg saying that 

The U.S. economy is incredibly resilient, he said, and he agreed with the adage 
that a recovery never “dies of old age.”  It takes a “negative shock” to  start
a recession, he said ­‑- “and those always have the Fed’s thumbprint  on
them.”

This is directly in line with my adage that expansions do not "commit suicide but rather it is always murder."  The slope of the Treasury Yield Curve is a great predictor of recessions and Federal Reserve, with its near total control of the shortest maturities, is the one in control of that slope.

Read more:  http://advisorperspectives.com/newsletters14/David_Rosenberg-No_US_Recession_in_Sight.php#ixzz2v25SJBe3