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.
The present Fed reaction to inflation was poor, but it is an effect of certain egregious acts in which the Fed engaged 15 years ago.
In 2008, a former chair of the Fed Reserve, Ben Bernanke, started the Fed Reserve on the path of the least understood and most devastating aspect of Federal Reserve malfeasance: Modern Monetary Theory (MMT). That theory postulated that no restraint is needed on printing money. Thereafter, three Fed chairs presided over printing $9 trillion U.S. dollars between 2008 and 2019, thereby ballooning the Fed’s balance sheet by a factor of ten.
The supply of money in the economy, governed by a powerful and highly autonomous Federal Reserve, has major implications for economic activity or economic destruction. Every U.S. dollar printed in excess of that needed to liquefy the private economy devalues every other dollar in circulation. This is an immutable fact. Our highly regarded Federal Reserve unilaterally chose to ignore it.
The Federal Reserve’s actions are the root cause of the inflation we have today. Inflation is devaluation of the U.S. dollar — which is caused by too many dollars in circulation.
Rising prices are the symptoms not the cause.
Federal Reserve rate increases will affect only the symptoms, not the cause. In the end, the Federal Reserve’s current policy will significantly harm the economy by shutting down business activity and destroying jobs, but will not stop inflation. Reducing the money supply will increase the buying power of each dollar.
To prevent a repeat of this painful, and predictable, error, the next question should be, why did the Obama administration and the Federal Reserve collude to print so many dollars? An outgrowth of MMT is an arcane (incestuous) practice called Quantitative Easing (Q.E.), wherein the Federal Reserve buys U.S. Treasury Bonds with dollars it printed. The power to print dollars is enormous and overlooked. The inflation pain we feel today is a direct result of printing too many dollars.
The Treasury Department used the excess money supply provided by the Fed’s printing press to fund government programs, government spending.
See a trend here? Since the Congress and president want to provide more government programs, like welfare and entitlements, and since Congress and the president have committed to spending far in excess of tax revenues and our nation’s ability to sell Treasuries in the open market, these self-serving public servants formulated Q.E. They printed massive number U.S. dollars to create the appearance of helping the poor, ignoring the massive inflation that would inevitably follow.
This historic malfeasance stems from a mindset, an erroneous idea — namely, that government and its professional bureaucrats are better at deciding what is right and correct than is each of us individually. Further, this mindset promulgates the most dangerous lie in our nation and the world: the individual does not have any right to life, liberty, and ownership. The corollary is that government owns everything and controls everything. Russia and Germany tried that throughout the 20th century; it didn’t end well for them.
What theory better explains why politicians either tax us or place us into crushing debt? The point is that these “leaders” decide how much to take from each citizen through taxation. And when they can’t raise enough money through taxation, they put everyone in debt. Unsustainable debt. Did you agree to any of this, at least at this level?
Sadly, the individual has no say in the matter. The final insult, when taxation and debt fail to crush our liberty, is that the elite create a monetary printing press that devalues every dollar in your pocket, thereby making it much more expensive to live.
Printing dollars causes inflation. Those dollars are used by other government agencies to spend on entitlements, welfare, infrastructure and the military. Some of those expenditures are worthy; many are not. Regardless, this level of spending, and debt, is coming to an end. Either we exhibit the fiscal discipline to reduce spending, or the world will force it on us. The former avenue is unpleasant but doable; the latter is unconscionable. We are “Free to Choose” — and now it’s time to choose.
Image via Pixabay.
This content was originally published here.
