The Federal Reserve not only runs US monetary policy with its interest rate manipulations and its quantitative easing program; it also “regulates” financial institutions. That’s why the fact that several Fed members made multiple multimillion-dollar stock trades in 2020 even as the central bank was putting its big fat thumb on the economic scales is more than a little problematic.
For months, Federal Reserve Chairman Jerome Powell has insisted that inflation is “transitory.” Instead of laying out a plan to taper quantitative easing, Powell used his Jackson Hole speech to double down on that narrative. Looking at the bigger picture, the US government has created a CPI calculation that intentionally understates rising prices.
This raises a question: why are the government and the Fed so desperate to hide price inflation?
The August jobs numbers came in much lower than expected, a kick in the teeth for those touting the “improving economy” narrative. Meanwhile, personal incomes continue to grow but rising prices are eating up that growth and then some.
The economic data suggest the Fed’s plan is failing and stagflation looms on the horizon.
There’s been a lot of talk about the Federal Reserve tapering quantitative easing. So far, it’s been nothing but talk.
A lot of people expected Federal Reserve Chairman Jerome Powell to offer some details and perhaps a timeline for the taper during his Jackson Hole speech. We got no such thing. Instead, he tapered the taper talk. In fact, Powell never uttered the word “taper.” he spent most of the speech trying to prop up his “transitory” inflation narrative.
This month marks the 50th anniversary of President Richard Nixon slamming shut the so-called “gold window” and severing the last ties between the dollar and gold.
On Aug. 15, 1971, Nixon ordered Treasury Secretary John Connally to uncouple gold from its fixed $35 price and suspended the ability of foreign banks to directly exchange dollars for gold. Nixon’s order was the end of a path off the gold standard that started during President Franklin D. Roosevelt’s administration, and it set the foundation for the massive government spending and inflation we’re dealing with today.
According to the Federal Reserve, it exists to “stabilize” the economy. Does it though?
Despite inflation coming in hotter than expected month after month this year, Federal Reserve Chairman Jerome Powell assures us we need not worry. This surge of inflation is “transitory.” But even if it isn’t we still don’t need to worry. He assures us that if inflation does prove to be significant and “materially” above its 2% goal, the Fed will use its tools to guide inflation back down.
We’ve been talking a lot about rising prices. The CPI has come in hotter than expected every month this year. We’re paying more to buy less.
We see the impacts of inflation on price tags, but sometimes it squeezes us more subtlety. It’s known as “shrinkflation.”
Inflation continues to run rampant, eroding our purchasing power even as policymakers continue to tell us there’s nothing to worry about. The US government continues to run up unfathomable levels of debt. We continue to endure a repeating cycle of booms and busts as Fed and US government policies blow up bubbles that inevitably pop.
It’s easy to get caught up in the news of the day and look at these issues in isolation, but there is one factor that ties them all together – fiat money. As economist Thorsten Polleit put it, “Basically everything bears their fingerprints: the economic and financial system, politics—even people’s cultural norms, values, and morals will not escape the broader consequences of fiat currencies.”
The US government continues to borrow and spend at a torrid pace, running massive deficits month after month.
The US national debt currently stands at nearly $28.5 trillion. That doesn’t account for the trillions of unfunded liabilities. And there is no end to the spending in sight. There are trillions of dollars in new spending programs coming down the pike.
The markets widely interpreted the June Federal Reserve meeting as hawkish. The central bankers pushed their projections for the first interest rate hike from 2024 back into 2023. But in reality, the Fed didn’t actually do anything. Interest rates will remain at zero and quantitative easing will continue unchanged into the foreseeable future.
The fact is the US government needs the Fed to continue its loose monetary policy to sustain its out-of-control borrowing and spending. Money is control and that’s why every government wants to control the money. Of course, this never works well for the average person. As Ron Paul put it, the road to big government authoritarianism is paved with fiat currency.
