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The Fed Clown Show (September 21st, 2023)

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On Wednesday, to nobody's surprise, the federal reserve open market committee left the fed funds overnight lending rate unchanged. Then fed chairman Jerome Powell stepped to the podium and stated that inflation won't hit the fed's 2% target until sometime in 2025. So, instead of the language about a recession in his previous statements, we now get the highest bond rates in 22 years and the promise of higher rates for longer and the promise of a "soft landing." The market reacted just like you'd think it would, especially the bond market, which controls interest rates.

And if you think rates are coming down anytime soon consider this, the national debt is growing at a rate of about $600 million per month, and rising. The amount of bond issuance the treasury will have to put into circulation to finance the debt is almost incomprehensible, but you can rest assured that a never-ending flood of supply will depress bond prices, which lead to higher interest rates, which makes your cash and assets less valuable by the day.

Do you really think that the supposed best and brightest economists and economic academicians didn't know that shutting down the economy, paying people out of the treasury to sit on their tails, and printing $6+ trillion of new money out of thin air would have such dire consequences? Anybody believe that? 

Jerome Powell goes to the mike about 20 times a year, at the 8 fed meetings, in his semiannual congressional testimony, and at speeches at symposiums and groups. And what wisdom have we gotten from the man in charge of our banking system and by extension our economy?

In March of 2020: "inflation won't be a problem." January 2021: Inflation is "transitory." September 2021: Interest rates won't rise until 2024. January 2022: Recession is needed to lower inflation. December 2022: Disinflation has begun. February 2023: A soft landing is possible. March 2023: The banking system is stable. And then Wednesday: Inflation won't hit 2% until 2025.

If you had taken those statements and turned them around 180 degrees, you would have finally had the truth.  

All that pablum and not one word about the runaway spending by the Biden administration and congress in 2021 and 2022, not one word about our suicidal national energy policy, and not a single word about how the federal reserve has broken the housing sector, where high rates and inflated prices have priced the first time homebuyer, and lower and middle classes out of the market, destroyed new family formation- which coincidentally skyrocketed under Trump- and destroyed about 15% of our GDP. 

So the question is who has the most credibility, Powell or Biden, or perhaps the real question is who has less? The damage the two of them, in concert, combined, have done to the country is historic, almost incalculable, ever increasing, and going to get way worse.  One thing is for certain though, Biden has one more year and Powell has 3, and they both must be replaced for the good of the country. 

Perhaps we should ask the presidential candidates what their monetary policy is in addition to their fiscal policy and who they would nominate as fed chair during the campaign. I would contend that the fed chair position is as important, perhaps more so, than any cabinet position and we the people deserve to know what monetary policy they support and what their positions are. They need to be vetted as thoroughly as any other high-level position in Washington, maybe even more so, up front. 

In the meantime, enjoy your $4 gas, your 8% mortgage, your $300 grocery bill, your $1000 car payment, your $300 student loan payment, your dwindling savings, the evaporation of the American dream, the clown show running our government and economy, and try to smile about it. After all, a comedy is always better than a tragedy.    

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