Monday, December 29, 2014

As the Fed Floods the Silicon Corridor with Money...

San Francisco is a great beneficiary.

The Bridge to Paper Gold
From “San Francisco and the Tech/Info Boom,” a study by economist Michael Mandel for South Mountain Economics:
By any measure, San Francisco has far out-performed the rest of the country since the Great Recession started in 2007. Between 2007 and 2013, the number of private sector jobs in the city rose by about 11 percent, compared to a decline of 1 percent nationally.
• Since the Great Recession started in 2007, San Francisco itself—a city of 825,000—has generated more private sector jobs than 47 out of 50 states. (via WSJ
However, because this is a Fed fueled boom, it will eventually crash.


  1. Oh, I thought the number of sailboats on the water was the indication of Fed money. But the bridge to paper gold is good too.

  2. Bob, I'd be interested to know how exactly "Fed money" fuels Silicon Valley and/or San Fransico. The Fed normally expands the money supply by purchasing government bonds from financial institutions who take a deposit at the Fed in return. As you know,the bulk of that process has piled up trillions in excess reserves. Now, if that money were to be lent or invested, I could understand (sort of) how Silicon Valley and Frisco get price inflated. But my understanding is that that the bulk of that "money" has of yet gone nowhere; it is sitting earning interest from the Fed. The better explanation(?) is that the massive Fed rescue of the banks saved the stock and bond market and it's that recovery (with some Fed help) that has fueled the boom in the special cities like New York and San Francisco.

    1. Wenzel discusses this regularly in the EPJ Daily Alert, just because a significant portion has ended up back at the Fed doesn't mean it all has. You have a very surface view of what is going on.