Posted BY: Jay Davidson
Talk about a tale of two realities. Certain Wall Street Journal articles quote two Federal Reserve presidents saying interest rates will remain high for a couple more years until business activity eases. In other words, that’s until the central bank’s handling of monetary policy puts our economy into recession.
Then the Journal lists several stories about softening labor markets, which translates into lower wage pressure. And a slowdown in shipping. Both items indicate a slowing economy. And isn’t that the reason the Federal Reserve raised interest rates so rapidly, in so short a time?
Then why are these Fed presidents, voting members of the Federal Open Market Committee (FOMC), touting higher rates for years?
Remember when Federal Reserve chairman Jerome Powell called inflation “transitory”? Their slow reaction to pricing inflation led to the Fed’s panic interest rate increases a year later. One can only conclude that the smartest bankers (just ask them) in the world were asleep at the wheel. Again.
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The present Fed’s reaction to inflation was poor, but it is an effect of certain egregious acts in which the Fed engaged 15 years ago.
The Fed has NO right to print or supply more money than is needed to facilitate the necessary transactions in our economy. Doing so just creates more inflation. Same with Congress raising the spending limits and borrowing more money. All those actions create inflation that robs people of the value of their savings and increases the cost of food and everything else.