Inflation

Alex Pollock explains to Bob the mechanics of the Fed's current insolvency and its implications for ordinary Americans.

Javier Milei has promised to make the US dollar Argentina's currency if he is elected. Whether it will help the Argentine economy is another matter.

With the creation of the Federal Reserve in 1913, the American people began their new "partnership" with the federal government. The results were wars, inflation, and currency debasement.

The call for "price stabilization" was part of the recent Republican debate. Despite its attractive appearance, having the Fed try to "stabilize prices" is a very bad idea.

Fed policymaking is all about political expedience. When we see Fed policy, we must keep in mind that "managing the economy" is secondary to managing public debt service and public expectations.

The vast American welfare system is imploding. Future tax revenues will not come close to meeting future obligations. Something must give.

As the national debt explodes and the federal government ramps up borrowing and spending, borrowing costs increase as well. Ordinary Americans will suffer the effects in due time.

Supposedly, the "big news" is the decline of inflation. However, the monetary and political forces driving the latest bout of inflation have not gone away.

Since the end of World War II, the US dollar has been the world's reserve currency. That status may well change because US monetary authorities insist on inflating the dollar into oblivion.

In the wake of bad news on inflation, the Federal Reserve is pushing up interest rates. However, a Fed-induced higher rate is not the same as an interest rate decided by the market.