If you were earning $3,000 a month in 1990, you will need to make $4,500 a month by 2030, just to keep up with your current life style. Here is why.

The US Federal Reserve could adjust the pace of asset purchases to send a signal about its intentions, vice-chair Janet Yellen said on Thursday, as she became the latest senior official to hint at a slowing of QE3.

The comments by Ms Yellen – the number two at the Fed and a likely candidate to succeed chairman Ben Bernanke next year – suggest that the central bank will use a slowing of asset purchases to show its view on the labour market.

The rate-setting Federal Open Market Committee has struggled to agree on conditions to end its third round of quantitative easing, but Ms Yellen’s remarks suggest it could show the kind of improvement it is looking for by linking a small cut in the $85bn pace of purchases to a change in the economy.

“In my view, adjusting the pace of asset purchases in response to the evolution of the outlook for the labour market will provide the public with information regarding the Committee’s intentions,” she told the Society of American Business Editors and Writers at a conference in Washington.  (Source:  ft.com   --  the Financial Times;  you will need to register to read the article,  but it is free).  

Editor’s notes:  understand that attaching quantitative easy (increasing the number of dollars bills in existence in the market place) to the unemployment rate,  is a fairly volatile strategy,  in the opinion of this lay observer.  We have been told that the Fed has a target strategy when it comes to the end of its “QE” strategy,  and that target is 6.6% unemployment.  

Problem:  the methodology for figuring “unemployment” has allowed for a certain fallacy when it comes to establishing this rate.   Take last month’s numbers,  for an example.  The unemployment rate fell from 7.7 to 7.6 percent, but,  you heard no rejoicing in that circumstance.  Why?  Because it was almost entirely the result of 663,000 Americans leaving the workforce,  in the single month of March.  When I say, “leaving the workforce,”  I mean they are no longer counted into any statistic that frames the nation’s unemployment picture and is published by our feckless media.  If those 663,000 had been counted,  in March,  the unemployment rate would have been 8.1%. 

(I figure a tenth of a point adjustment,  either up or down,  with every 156,000 change to previous reporting period). 

If the Fed is not taking into consideration the fact that the workforce is shrinking,  its decisions based on the unemployment rate,  will,  obviously,  be skewed.  Of course,  one would think these people know this.  If that is the case,  they are using the unemployment rate as an excuse to get away from the practice of propping up the investment world while doing ultimate damage to the dollar. You do know that the Fed is adding 85 billion dollars to the "economy" each and every month,  right?  That's a trillion dollars per year,  of "printed" money.      

Some will argue that the dollar “is running strong.”  But this is a comparative analysis,  not one based in concrete fact.  The “concrete” fact of the matter is that the dollar has lost 20% of its value since 1990 and the Fed is proposing a 30% decrease in its value by 2030.  If you were making 3,000 a month,  in 1990,  you will need to earn $4,500 by 2030 just to keep up with current standards.  Anyone think that is going to happen?