The Fed Funds Rate is 2.5%. After
the 2008 Financial Meltdown, the Fed lowered the rate to 0.25%.
https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
https://www.macrotrends.net/2015/fed-funds-rate-historical-chart
12/20/18 2.25% to 2.50%9/27/18 2.00% to 2.25%6/4/18 1.75% to 2.00%3/22/18 1.50% to 1.75%12/24/17 1.25% to 1.50%6/15/17 1.00% to 1.25%3/16/17 0.75% to 1.00%12/15/16 0.50% to 0.75%12/17/15 .025% to 0.50%https://www.federalreserve.gov/monetarypolicy/openmarket.htm
The Fed needs to hold the line
and follow the economy, not distort it. See article below. What Would Happen If the Federal
Reserve Did Nothing? By Bill Bonner, 7/17/19.
The FOMC [Federal Open Market Committee] has been
navigating between the shoals of overheating and premature tightening with only
a hazy view of what seem to be shifting navigational guides…– Jerome Powell, Chair of
the Federal Reserve
YOUGHAL, IRELAND – The Fed
has a less than “hazy” view of its “navigational guides.” It is lost at sea. It
has no idea what is north or south… up or down… right or left.
The U.S. economy, says
Powell, is in a “good place.” The president, meanwhile, says it is in a great
place, that it’s “the greatest economy ever.”
But according to both
Powell and Trump, it got to this good place – even by sailing in the wrong
direction.
Here’s Bloomberg: While
Powell’s comments on Capitol Hill about the current outlook cemented
expectations for an interest-rate cut this month, he also acknowledged for the
first time publicly that officials have potentially tightened monetary policy
too much because they underestimated shifts in the U.S. economy.
Maybe Mr. Trump is right.
If the Fed had just been able to see through the haze more clearly… if it had
just a bit of the instinctive, stable genius of the commander in chief… Wow! We
really might be at Dow 30,000… or, what the heck… Dow 50,000! Yesterday, again, the stock market took a
rest… barely leaving home from sunup to sundown. Investors must have been
wondering…
The Fed set the wrong
course… but seemed to end up in the right place. The lowest unemployment in 50
years. The highest stock market ever… Maybe it should just stay on the course
it’s on.
And, now that it can see
more clearly… unemployment will go down even further and stocks will go higher,
right?
But what makes us believe
the Fed has got it right now? If it was wrong before, maybe it’s wrong again…
and maybe everything won’t go so well this time…
Or, maybe Fed policy
doesn’t really have any effect at all?
If any of them bothered to
think about it for more than a second, their heads would be spinning with even
more questions…
If the economy is in such
a “good place,” why does it need a key lending rate suitable for an emergency? If
“the greatest economy ever” has already knocked unemployment down to
rock-bottom levels, for whom is the Fed creating more jobs?
And how did our fathers’
economy – of the 1970s, 1980s, and 1990s – function with the Fed’s interest
rate more than twice what it is today and still produce growth rates twice as
high?
Maybe you, Dear Reader,
have asked those questions yourself. (We hope not; don’t you have something
better to do?) But rather than confronting them head on, we will sneak around
back and ambush a related question that might help us with answers to them all.
We’ve seen that the Fed’s
bias towards lower and lower interest rates is meant to stimulate the economy…
and that all forms of stimulus are varieties of inflation. They “work” only by
tricking people into spending money they don’t actually have.
In the early stages, the
feds can sometimes make a heroic effort to stop this inflation from getting out
of control. That is what Paul Volcker did when he put the federal funds rate at
20% and halved consumer price inflation in 24 months.
But when Paul Volcker took
over at the Fed in August 1979, the U.S. government had less than $1 trillion
in debt. Now, it has $22 trillion. Add household and business debt and the
total is $72 trillion.
Then, stocks were at their
lowest level in 50 years. Now, they are at their highest level ever. Then, too,
unemployment was almost twice what it is today.
In the early 1980s, there
was everything to gain from getting ahead of inflation. Today, there’s
everything to lose. Now, it’s too late for heroics.
This is the answer to the
question you have not yet asked. How come the feds have to make the situation
worse by further distorting prices… adding more fake money… and increasing the
debt burden?
Why can’t the Fed just
leave interest rates alone? Why does it have to cut them? Inflate or Die?
Couldn’t we just stand still… neither inflating more nor dropping dead?
Norb Leahy, Dunwoody
GA Tea Party Leader
No comments:
Post a Comment