The Real Goal of Fed Policy: Breaking Inflation, the Middle Class or the Bubble Economy?
By Ellen Brown / Original to ScheerPost
“There is no sense that inflation is coming down,” said Federal Reserve Chairman Jerome Powell at a November 2 press conference, — this despite eight months of aggressive interest rate hikes and “quantitative tightening.” On November 30, the stock market rallied when he said smaller interest rate increases are likely ahead and could start in December. But rates will still be increased, not cut. “By any standard, inflation remains much too high,” Powell said. “We will stay the course until the job is done.”
The Fed is doubling down on what appears to be a failed policy, driving the economy to the brink of recession without bringing prices down appreciably. Inflation results from “too much money chasing too few goods,” and the Fed has control over only the money – the “demand” side of the equation. Energy and food are the key inflation drivers, and they are on the supply side. As noted by Bloomberg columnist Ramesh Ponnuru in the Washington Post in March:
Fixing supply chains is of course beyond any central bank’s power. What the Fed can do is reduce spending levels, which would in turn exert downward pressure on prices. But this would be a mistaken response to shortages. It would answer a scarcity of goods by bringing about a scarcity of money. The effect would be to compound the hit to living standards that supply shocks already caused.
So why is the Fed forging ahead? Some pundits think Chairman Powell has something else up his sleeve….
Read the full article here.
Hmmm... I don't know that I agree that energy and food are the key inflation drivers. I'd say housing, healthcare, higher education and hope for retirement, or the unaffordable 4H that rise in proportion with the money put into circulation through low-interest mortgages. Since everyone needs a home, the cost of services that can't be outsourced has to go up proportionally--hence the UC grad students strikes that will continue to raise tuition costs beyond the 400% they've gone up since you and I were in college.
The rise in interest rates is to shake loose all the variable mortgage owners so the asset grab by Blackrock et al can continue. There's no way for them to push more money into the economy to cover the interest they didn't create with the principal, as I learned from you. So the only thing they can do now is become owners directly because the illusion of home ownership, which was always renting from the banks, can't be sustained. My two cents.
Dear Ellen I suggest the cause of the inflation in the US is being caused by the end of the PETRODOLLAR. The fact that today countries can pay for oil with gold, silver or other currencies means that all those dollars that had been in reserves of most countries are being exchanged by other safe instruments, and all those US dollars are.... going back HOME to the US generating the huge inflation we are witnessing. My view is this is only the beginning and the more countries see the US dollar as weak, the more it will be dumped, accelerating the inflation in the USA.