Perfidious Fed tries to slow economic growth

Pratt on TexasThe perfidious members of the Federal Reserve have moved to subvert economic growth with their progressive-style attempts to manage our economy.

“Wednesday’s quarter-point increase, to a range of 2.25 percent to 2.5 percent, lifted the Fed’s benchmark rate to its highest point since 2008. It will mean higher borrowing costs for many consumers and businesses,” reported the AP.

Inflation is a terrible thing but only when it is inflation caused by government manipulation of an economy, as in the things the Federal Reserve does.

Natural inflation does not reduce the value of our money it simply pushes prices upward in sectors where demand is strong and the market reacts in billions of individual transactions to balance such with changes in behavior and innovation.

Government induced inflation raises prices not through market demand but by lessening the value of the currency – it is an invidious tax on every person.

U.S. inflation is very low, running well under two percent and appears to mostly be the result of actual economic growth. The idea that we need to slam the brakes on natural growth, growth that isn’t even at a comfortable five percent per year level, is absurd.

The Fed’s action is perfidious and can easily be seen as designed to hurt economic growth for political reasons. Markets cannot be well managed by progressive mandarins any more than you giving up Styrofoam can stop the climate warming that has consistently been underway since the last ice age over 11,700 years ago.

Like most things created to remove politics from political bodies the Federal Reserve simply engages in political action behind a pretend veil of non-partisanship. It’s a veil that the informed can plainly see through.

Comments

  1. Inflation is not an indicator of economic growth or well being. Inflation is a measure of the amount of money in the supply VS the amount of money needed. If the amount of money in the supply increases faster than the amount of money needed, prices go up (inflation). This means the money supply is “inflated” and we get inflation. If the amount of money needed increases faster than the amount of money in the supply, prices go down (deflation). The means the money supply is “deflated” and we get deflation. Inflation is great for debters. Deflation is great for savers. During the 1870’s-1900’s, the US kept the money supply constant. The value of US economic output grew, and prices for every day commodities dropped precipitously, creating untold wealth for millions, without having to give everyone lots of money. Simple example, lye- drain cleaner, cost $400 per pound during the 1830’s. With improvements in production, and also a limited money supply, you can now by a pound of lye to clean your drain for $10-$20. Could you imagine how much money would be around if, the price of lye remained constant?

    Anyways, I personally think it is good to make borrowing more costly. We can’t have a capitalist society without capital, and debt is not capital. You could ask, if inflation is so good for debters, why am I not experiencing the benefits of inflation? Quite simple…inflation is good if wages increase with inflation. For my entire working career, inflation was reported at 5%, but my yearly raises were around 3%. Where does all this extra money go? I assume Wallstreet & investment banks. The S&P futures market, the Dow Jones, and NASDAQ are all up in “value”…

    Governments like fiat currency because then they get to control the money supply, instead of relying on real tangible resources that have a limited supply. The Great Depression, one of the worst economic downturns in living memory, was a deflationary event. In Germany, during the 1920’s they had the first recorded case of “hyper-inflation”. It was their worst economic downturn that is just barely still in living memory. What is interesting to note, is that Germany avoids inflation at all costs, while the US avoids deflation at all costs.

    Anyways…personally, I hope this raise in interest rates improves the interest rate I get on my savings account, but I know that it probably won’t make a lick of difference. It probably is politically motivated, in the hopes that if they can wreck the economy they can wreck the encumbent’s re-election chances. It is astounding that the government has so many levers to control this economy, and people still call it capitalist.

    • Pratt on Texas says

      Much of what you are saying is fine but it is wrong that they like flat currency. For the past 40 + years the goal of the Fed and most in the West is “manageable” inflation annually. This is why so much has been done to debase the value of the currency. Classical economists are simply asking for the value of the dollar to remain steady as opposed to being cheapened by induced inflation.

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