The Federal Reserve guards its independence with indefatigable ferocity.
It is so intent on keeping it that it will practically do anything for the politicians that might otherwise take it away.
It’s been like this for one hundred years and more.
The irony should be obvious.
If you have to acquiesce to your masters to retain your decision-making autonomy, you do not really have it at all. And the Fed never has had it. It has actually two masters: the largest and most powerful banks and the largest and most powerful forces within government. Most of the time these days, those are the same people.
The Fed is there to serve them while imposing costs on the rest of us.
Everyone associated with the Biden administration has been propagandizing for months and years about the glorious results of Bidenomics. All corporate media echos this gibberish even though most people know it is completely untrue. The data is fake. When it is not fake it is not relevant. When it is relevant, the underlying reality is terrible.
You can see it in the savings rates alone. It is going down, now at 3.7 percent (historical rates have been closer to 10 percent). This is true even though for the first time in more than a generation there is finally a positive return on savings!
Without savings, you don’t get sustainable investment. Without that, prosperity dies a gradual death.
How could personal savings be going down? The answer is unbearably obvious. People do not have discretionary income to save. Most people are living paycheck to paycheck, despite record numbers of multiple jobholders. The most reliable data we have reports real income as down.
What buoyancy there is in American economic life is due to growing debt and government spending which means more debt. It simply cannot last. It’s a ticking time bomb. The substance of a genuinely prosperous society is being eaten out before our very eyes. You know this in your heart.
In the last four years, the Fed has stolen 20 cents on the dollar of your purchasing power. They sent you money in the mail and then took it away with the hidden tax called inflation. Then they raised rates to curb the inflation just when American households had run out of money to save.
Who ended up with the trillions in newly printed dollars? The banks. Great reset businesses like wind turbine companies. Online learning platforms. New billionaires were minted at your expense and you are left holding pockets of change. Now the IRS wants those.
But here’s the thing.
The Fed has said it is prepared to lower rates this year. Not now but later. Perhaps closer to the election so the credit-addicted financial markets can get another injection of narcotic to make it float as high as possible. The idea here is to create the illusion of prosperity in service to the deep state that absolutely prefers that Donald Trump not get a second term.
The idea of rate-cutting, in theory, is to dig the economy out of recession or prevent one. It does not work for the long term but that’s the theory. This is what’s called countercyclical policy. It’s a discredited disaster but the Fed does it anyway.
As a rule, a long history of failure does nothing to dissuade the Fed from repeating the same.
But if the economy is all peachy keen and everything is just hunky dory, why would the Fed need to be talking about cutting rates? What possible purpose could it solve?
You can observe the mainstream financial press warming the public up now for this eventuality. They are answering the obvious question the following way. The Fed is just being cautious and deploying earned slack in their interest rate management in service of the American people.
I’m sure you believe this!
There is absolutely no basis whatsoever for cutting rates now. They have barely been positive in real terms for a few months of the last quarter century. The policy of zero interest gave rise to bloated companies, absurd financialization, DEI, ESG, and an entire overclass of wildly high-paid credentialed elites who do nothing but the devil’s work.
So good riddance. But rates are now barely positive according to all official inflation and rate data. Indeed they need to be vastly higher if they are going to be anything approaching free-market reality.
(Data: Federal Reserve Economic Data (FRED), St. Louis Fed; Chart: Jeffrey A. Tucker)
Right now we have an economy running on fakery. The Fed’s plan to cut more later this year is a political strategy and nothing more. It will do long-term damage. It will further the credit/debt addiction and it will install a regime that is currently working to convert the United States into a prize for the great reset, ruled by the World Health Organization and throwing aside its pro-freedom patrimony for a ghastly and malicious hellscape.
Meanwhile, the path could reignite inflation, just as it did after 1976. But, heck, the Biden junta will be running things and the goal will have been achieved.
I’m not being partisan here. I’m only suggesting that having a giant money-printer down the street from the White House might not be the best path for guaranteeing democratic fairness or sound money. The mix of politics and monetary policy is utterly toxic. And if this year proceeds like it appears to be mapped, we are about to find out just how nefarious this mix is.
And, hey, if this Fed caper doesn’t work, they always have Taylor Swift and her Pfizer-salesman boyfriend.
They have laid very clever plans but what the Fed and the White House cannot control is the massive loss of trust among the public, and they cannot quell the growing public anger about immigration disasters and declining American prosperity and freedom. The illusion works until it suddenly does not work anymore.