The June Federal Open Market Committee Meeting (FOMC) presented more of the same problem, the continual purchase of $120 billion in bonds a month and near zero interest rates. Only this time, the Fed increased the interest it pays on bank reserves from 0.10 to 0.15 percent. The stated purpose, per Chair Jerome Powell, was
in order to keep the federal funds rate well within the target range and to support smooth functioning in money markets.
This “smooth functioning” market explanation endorses the same proverbial green-light to all central bank interventions. If it wasn’t for the Fed, markets wouldn’t function properly, or at least that is the basis for all inflationist policies put forward by the Fed.
He goes beyond routine talking points, this time illustrating the complete disconnect between the central bank and reality. When discussing long-term (price) inflation expectations, he says:
They moved down during the beginning of the pandemic, you know, sort of further exacerbating concerns that we might find ourselves where, for example, the ECB and the Bank of Japan [have] been where you have expectations and inflation itself sliding down, and you have a really hard time stopping that process once it begins. So that was a concern.
Stated simply, there exists a belief that if prices of goods and services decrease, bad things happen. Indirectly, he is saying that in Europe and Japan, there was some sort of failure which led to prices decreasing. How bad it is there versus how bad it could be here is never articulated. The Fed aims to do things differently, intervening to make sure prices don’t “slide” down.
He continues:
So, it’s good actually to see longer-term inflation expectations move back up to a range—it’s a range that’s consistent with what our objectives are.
Literally saying it’s good prices are expected to go higher in the foreseeable future.
His elation over inflation expectations ensues:
It’s gratifying to see them having moved up off of their pandemic lows. And, you know, as you know, it’s fundamental in our framework …
In a world ravaged by a government shutdown, where millions are rendered without jobs, claiming the cost of everything should increase in prices will make one’s life better remains without merit.
Often people say things like “it’s good for business,” or something only half thought out. They will only see the seller who has sold at a higher price and think this is beneficial, failing to consider the inputs the seller must pay to bring his product to production. Also there is the failure to realize the same seller must then go out and live in this world, consuming products, also now higher in price.
There is an unhealthy affixation to the perpetual increase in prices, as measured by a price index. That has been the cause for generational loss of purchasing power of our dollars, increase in debt levels and overall hardship for the masses.
The misunderstanding of economics doesn’t stop at prices. Listen to Powell as he shares a concern over the “full employment” mandate:
And I think during the last cycle, there were waves of concern that we were reaching full employment as early, you know, as 2012 when I arrived at the Fed …
There were “waves of concern” that full employment was coming earlier than anticipated, the supposed dreaded scenario of living in a nation where too many people are all working at once, creating businesses, manufacturing goods or providing services for the needs and wants of others. The America of 2012 must have been so bad with all these people working, according to the chair.
Ultimately, it doesn’t matter whether the Fed is a clandestine force operating nefariously against public interest, or whether they are so high in their ivory tower really believing they are a force for positive change; we may never know what is said behind closed doors. What we can say for certainty is that not only are they not taking us in a direction towards prosperity, liberty and freedom, but they are steering us, with all of their might in the exact opposite direction.
Until this becomes both proverbial and literal front page news, “they” will continue to win, and everyone not closely tied to them will continue to lose.
