Gas Prices are at all time highs for this time of year, and nearing $4 per gallon nationwide. Combined with the "NO NEW TAXES FOR ANYONE MAKING UNDER $250K PER YEAR" Payroll Tax hike (It wasn't technically new, it was suspended then un-suspended. You really need to read between the lines on those campaign promises), Main street is once again taking a kick to the crotch financially to support the "recovery". The 60% of Main Streeters that don't own stocks might be hearin' all the cheerin' about stocks being at 5-year highs and wonder why their wallets are still empty and getting worse. (Hint: it's because the $3 Trillion and counting the FED has printed isn't going to you. It's going to the Fed Banks then the stock market). 
In the age of the Internet, even stupefied "Honey Boo Boo" viewers are beginning to suspect something fishy with fuel prices and our Print-Happy Central Bank. Perhaps anticipating this, former Fed chairman Alan Greenspan chats with the "Money Honey" Maria Bartiromo about what really matters in our economy. You'll be surprised to learn it's not actually the economy. Alan was mentor to current Fed Chairman Ben Bernake, and Ben controls America's money supply. When asked about how the "sequester" spending cuts would affect the economy, Alan had this gem: "The critical issue is how does it affect the stock market". Say What? "The stock market is the key player in economic growth now." Really? Why then is the real economy limping along between zero and 2% growth while the stock market is up over 120% the last 5 years? Hmmm. But wait, there's more: "The sequester will have a negative impact on the economy, but if the stock market stays up the affect will be minor." For those who make their money holding stocks, I presume. The coup-de-grace: "Stock Prices are not only a LEADING indicator of economic activity, they are a major CAUSE of it". Oy. Ummm...Mr. 
frighteningly myopic economic thought. Click on the charts to make 'em bigger.
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| Dow Jones 1926-1933 Stocks are a "Leading Indicator"? Looks like the Dow didn't see that little hiccup called the Great Depression coming. That started about two months before the Dow plummeted 90%. |
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| Sp-500 performance in the QE Era. Since December of 2008, The Federal Reserve has been printing dollars to
What the FED won't admit is the correlation between our real economy and the stock market broke dramatically in 2008. This is what happens when you bail out corrupt banks at the expense of 99% of your people.
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| Total Gasoline Retail Sales by Refiners 2007-2012 down 50% from July 2007. |
Fed officials will get defensive when faced with that chart. They'll say if prices are up but demand is down, then there must be a supply problem. Middle East tension is a favorite. North African pipeline disruptions. Hurricane Sandy. The One-Armed Man.
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| US Supply of finished motor gasoline 257 million barrels January 2013. The same as January 2008. |
Nope. Supply is fine...our reserves at Cushing Oklahoma are actually overflowing with over 320 million barrels.
So supply is up, demand is down, but gas prices are at record highs? What gives?
That, my friends, is the $3 Trillion (and counting) question.
Based on Alan's interview and the Fed's activity the last 5 years, our unelected leaders think printing money to manipulate stocks via QE is the road to prosperity. Unfortunately that freshly printed cash doesn't go to me and you. It goes to the member banks and shows up as "Reserve Balances with Federal Reserve Banks". Sooner or later, they reason, all that free money they are giving to Wall Street will trickle down to us peasants and make everyone rich. QE3 was announced in September of 2012. Let's compare those bank balances and see if unemployment I mean stocks are still feeling the QE love.
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| Reserve Balances v. SP-500 since QE3 announced September 2012 |
Woo-hoo! Look at that market go! We are some BADASS Central Bankers ya'll!
Alas, that pesky gasoline is STILL priced in dollars though....
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| Reserve Balances v. Gas Prices since QE3 began September 2012 |
QE1 December 2008-March 2010
During QE1, the central bank purchased a total of 1.25 trillion dollars worth of agency MBS and agency debt, and 300 billion dollars in Treasury securities.
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| Reserves v. Gas Prices QE1 |
QE1 ends March 2010. Gas Prices fall 13%.
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| Reserve Balances v. Gas Prices between QE1 (March 2010) and QE2 (August 2010) |
Unemployment falls dramatically right along with gas. That's good for the economy right? I thought that's what QE was for...
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| U6 Unemployment v. Gas Prices March 2010-August 2010 |
Unfortunately for Main Street USA, we are not the economy our Central Planners care about. Wall Street was not happy about their free money spigot being turned off. Stocks were falling after QE1 ended. They called their boy Ben Bernake and he announces QE2 in August 2010. Wall Street rejoiced. Stocks soared. So did gasoline prices.
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| SP-500 v. Gasoline Prices |
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| U6 Unemployment v. Gasoline Prices |
Gas Prices soar 45%.
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| Reserve Balances v. Gas Prices Note how gas prices didn't move until the fresh money hits the reserve accounts. Wall Street can't buy oil futures until Ben gives them some more cash. |
QE2 ends, and gas prices fall 8%.
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| Reserves v. Gas Prices after QE2 ends June 2011-September 2011. |
Between the end of QE2 in June 2011 and QE3 in September 2012, we had "Operation Twist" in which the Fed suppressed mortgage rates by juggling existing holdings. They did not print money during this time. Note in the chart below that gas prices remained anchored for this stretch, albeit at elevated levels.
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| Reserve Balances v. Gas Prices 2008-Present |
Conclusion:
There is a near 100% correlation between money creation and fuel prices. The Fed is arguing higher stock prices are what matters in the real economy. It certainly does, for some. Retirees, 401k owners, pension holders, Wall Street and all the businesses they frequent are all feeling the love of a nominally higher stock market (don't price it in gold...it's not pretty). The FED believes they can control stock prices with the printing press, which they can...for now. Publicly the FED blames higher gas prices on everything under the sun EXCEPT the true cause...them. The unemployment they claim to be helping is adversely affected by QE when gas hits $4 per gallon. The real economy hits a brick wall at those prices. There has been little organic growth in our economy since the 2008 bailouts, only artificial "stock markety' growth. Which stands to reason...all the money from QE is going to the very TBTF banks that caused the crash and control markets. According to Greenspan, that's all that really matters. QE3 began in September at $40 billion per month and QE4 in December added $45 billion per month, so we're creating $85 billion a month from now until unemployment falls "below
6%-ish". However, QE is now actually INCREASING unemployment by driving fuel prices through the roof.
What's good for the goose (stocks) is not always good for the gander (the real economy)
To illustrate the laser focus the Fed has on the Stockonomy, the market went down one entire percent February 21st after some "not super easy money" language from the last FED meeting was published. It had been up nearly every day for a month and 8% for the year since QE4 was announced. Would you like to know how long it took Wall Street to start crying for QE5? Try 7 hours.
The next day, the market went down another whole percent! That's TWO percent off of a 120% rally in 5 years, and two down days IN A ROW! Cataclysmic. Something must be done or the whole Ponzi scheme Market will crash. Fancy a guess how long it took for the FED to respond to the bleatings of Wall Street? Anyone? Anyone? Try another 7 hours.
Just when you were about to see prices drop at the pump, in swoops the FED to screw you Mainstreet save Wall Street from a knee-shaking-panic-inducing-pee-your-pants-the-world-is-ending-and-we're-all-gonna-DIE! 2% selloff. Whew. Thank you, Ben. That was close.
Myself, I'm feeling pretty QuEsy when I fill up the truck.
http://english.cntv.cn/program/newsupdate/20121213/104606.shtml
qe timeline
http://www.mcoscillator.com/learning_center/weekly_chart/americans_really_are_using_less_gas/
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