Business News Media Won't Tell Americans Why there's Raging Inflation. The Fed's Colossal Failures.
March 12, 2022 The Federal Reserve (remember it is not Federal nor is it a reserve) has only 2 mandates.
1.) Set monetary policy to provide stable pricing. 2.) Set policy favoring full employment. First we should question why they even have these two functions. You can use internet searches to discover their spurious origins but we're stuck with them so let's just dive into how it keeps getting worst for The Fed. Take mandate #1 which is to provide stable pricing.
Inflation in USA is at the highest level since the 1970s. Gas is up 38%, Used cars up 45%, Beef up 17%, etc. Again, The Fed is supposed to only have the two powers listed above. Recently their powers have expanded to the detriment of US ordinary citizens / workers.
The Fed's expanded powers are gigantic failures.
Letter grade A means good , F means bad or failure
1. Regulating long term interest rates to smooth out economy. Letter grade F (They are failing)
The Fed last raised interest rates in 2018. They had an opportunity to rein in inflation in the past 3.5 years but did not raise rates while continuing 120 billion in asset purchases.
The chart below indicates the "Real Fed Fund Rates" (Fed Funds rate minus CPI) currently at -7.8%. This means you are guaranteed a lost of almost 8%. This is significantly lower than the crash of 2009.
Inflation is the increase in money supply. Prices rising are a symptom of the increased money supply chasing around the same goods and services.
2. Take care of the banking system. Letter grade F (They are failing) 3. Take care of the military industrial complex. Letter grade A (They are great at this)
4. Make sure the stock market is up. Letter grade F
Though SPY has been in up channel for past 2 years it is an illusion. 70% of S&P 500 stocks are down over 10% from their highs.
The Fed is trapped. They have no tools. If they raise 25 basis points it will have same impact as 100 basis points because most of the debt in the system is new debt that didn't go through the last rate hike cycle.
This means inflation will be with us indefinitely. This means the lower and middle classes will be hit hardest. Right now the present regime is spinning this as Russia's fault. Before it was Russia's fault it was "supply chains." Before it was "supply chains" it was "transitory."
The only move The Fed has left is to kick over the table and try to roll out the central bank digital currency which will be very bullish for silver and gold.
Below is the Federal Reserve's "white paper" explaining their digital currency. aka, The Central Bank's Digital Currency. Money and Payments: The U.S. Dollar in the Age of Digital Transformation https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf
Other related news. Geopolitical and Polarization. East vs West.
Very bullish for silver and gold.
To read why Emerging markets like Brazil and India will favor Russia & China over USA & Europe click here