It’s sad and laughable, unreal, but not surprising; it didn’t make headlines but should have been front page news. Earlier this month the Federal Reserve released a one-page document called the Statement on Longer-Run Goals and Monetary Policy Strategy.
Deception is easy to spot when the most basic inquiry illuminates falsehoods being implemented as monetary policy. We deserve better. Here are some of the most egregious ideas:
… following periods when inflation has been running persistently below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time.
This absolves the Fed of the current “high” (price) inflation we’re seeing. Since inflation data was low for a relatively long time, higher inflation (i.e. currency debasement) is acceptable because it allows the Fed to achieve a long-run inflation equilibrium, close to their arbitrary 2% figure.
Since it’s their job to intervene in the market, we mustn’t ever think they’ll acknowledge the issues with intervention:
Employment, inflation, and long-term interest rates fluctuate over time in response to economic and financial disturbances. Monetary policy plays an important role in stabilizing the economy in response to these disturbances.
The definitions of stabilizing and financial disturbances are seldom elaborated; but apparently monetary policy is supposed to smooth out any alleged problems in the economy.
However, by expanding/decreasing the money supply, or raising/decreasing interest rates, literally at will, the Fed causes the very distortion it claims to be combating. In more extreme worldwide or historical cases, central banks are at the heart of currency collapse. It’s unfathomable to think a central bank could ever “fight inflation,” since they notoriously abhor deflation.
They are also fixated on reaching maximum employment as part of their mandate. But here’s the problem:
The maximum level of employment is a broad based and inclusive goal that is not directly measurable and changes over time owing largely to non monetary factors that affect the structure and dynamics of the labor market.
Reiterating:
Consequently, it would not be appropriate to specify a fixed goal for employment…
For an organization claiming to be data driven, it’s a little odd that one of their primary state objectives cannot be articulated nor measured.
Making matters more peculiar, they maintain that their untenable 2% inflation target is linked to their immeasurable employment target, as stated:
The Committee’s employment and inflation objectives are generally complementary.
Yet over a year ago in The Phillips Curve: Read the Fine Print I referred to the St. Louis Fed’s Cloud of Points, whose own data shows no correlation between prices and employment in the last 50 years.
The Phillips Curve should have been abandoned many decades ago. The above statement that employment and inflation are complementary is simply a lie.
Every five years they undertake a “thorough public review” of their monetary policy. It’s these incomplete theories, the subterfuge, the subtle deception, masquerading as well vetted policies that should publicly discredit the Federal Reserve.
Their economic policies have a gross disregard for economics. They cannot define many of their terms, defend their rationale, nor has history ever shown the Fed’s usefulness. In a free market, prices will fluctuate for countless reasons. But the long-term trend would be a decrease in prices over time, whereas with a central bank, prices will only follow an upwards trajectory until hyperinflation sets in.
Fed policies are first and foremost pro-inflation for the purpose of helping a handful of institutions and wealthy people. Thanks to the Fed, there will never be any kind of market stability or economic enhancement. Rather, there will only be instability and economic destruction. This is the way of central banking.
