September 19, 2020

It’s Time to Rein in the Fed
At the Kansas City Federal Reserve’s virtual Jackson Hole economic-policy symposium, Fed chairman Jerome Powell drove a final stake into the legendary inflation fighter Paul Volcker’s Fed. The new orthodoxy promises easy money as far as the eye can see and holds that inflation is good -- not Venezuelan and Zimbabwean hyperinflation of course, just a moderate dose -- thus ensuring that a dollar every year is worth less. Americans should be afraid.Powell announced the Fed’s new inflation-averaging strategy. The central bank is changing how it defines and attempts to achieve the 2 percent inflation target, which it adopted on its own authority in 2012. Henceforth, the Fed will attempt to catch up for past inflation shortfalls. Powell warned that inflation below “its desired level,” which our enlightened central bankers have decreed is 2 percent, can lead to an “unwelcome reduction” in inflation expectations, causing lower inflation. Joe and Sally Sixpack, however, would view gas, steak, and dental check-up prices not rising as welcome.Additionally, the Fed chairman declared the central bank would not, as it has in the past, preemptively raise interest rates to stave off higher inflation when unemployment falls below its natural rate.The new policy has an asymmetric pro-inflation bias. America’s central bankers are not contemplating deflationary policies to offset excessive past inflation. If inflation were 5 percent in period one, the Fed would try to bring it down to 2 percent in period two, not to negative 1 percent.The Fed is a masterful political Actor. Powell touted “The Fed Listens” events as “connecting with the American people.” All well and good, but it is Congress, which represents the American people, that the Fed is supposed to heed.The Fed isn’t independent or the policymaker. It is an instrument of Congress, which by statute directs it to conduct monetary policy to achieve “stable prices,” maximum employment, and moderate long-term interest rates. Stable prices mean inflation hovering around zero, not prices doubling every 35 years. If a 200-pound MMA fighter’s weight increased 2 percent every year to 244 pounds after a decade, nobody would suggest his weight was stable.Shame on the Fed for “redefining” its role under the law. But shame on Congress for not insisting the central bank hew to statute.If Congress wants inflation, it should pass legislation changing the Fed’s mandate to that effect, which President Trump or Biden would likely sign. But while many congressional cravens may want inflation, few want to go on record voting for it.Powell allowed, “Many find it counterintuitive that the Fed would want to push up inflation.” No kidding. Money is a unit of account, a means of exchange, and a store of value. Stable money is a sine qua non of stable, prosperous, free societies. There’s enormous value in the dollar remaining constant for consumers and firms planning, transacting, and saving. Imagine a world where a yard continually changed.The received wisdom is that deflation is bad. Precipitous deflation is harmful. However, gentle deflation benefits many firms and individuals. During much of the 19th century the U.S. enjoyed mild deflation.To bolster inflation the Fed is keeping real wholesale interest rates negative.Interest rates are the price of present versus future investment and consumption. They are the economy’s most important price, dynamically signaling where and when capital should be allocated to maximize value.Keeping interest rates artificially low, as the Fed has done for nearly two decades, causes systemic malinvestment, incentivizes excessive risk-taking, and sustains zombie firms, making society poorer, and is sowing the seeds for the next crisis. It punishes savers and creditors.There are, however, powerful constituencies for easy money. America’s biggest borrower, the federal government, loves it. Real-estate developers and brokers and much of Wall Street also vigorously support cheap debt.With everyone focused on the COVID-19 pandemic and recession, inflation is low on people’s list of concerns, but it’s brewing. From December 2019 to August 24, 2020, the monetary base (M1) increased 35 percent. The Fed’s real benchmark interest rate is negative. The pandemic has crimped production. As America limps out of the crisis and the velocity of money -- the rate at which money turns over -- recovers, it’s a recipe for inflation.Since the Fed’s creation in 1913, its policies have massively debased the dollar and caused or contributed to multiple economic crises, including the Great Depression and the Great Recession, devastating Job and wealth creation. While the central bank can affect price levels, easy money can’t increase sustainable long-term employment and wealth. Congress should, therefore, eliminate any doubt about what the Fed can and should do by doing away with its “dual” mandate, narrowly focusing it on maintaining stable prices, something that it is equipped to deliver.
Related Stories
Latest News
Top news around the world
Coronavirus Disease

Coronavirus disease (COVID-19) is an infectious disease caused by a newly discovered coronavirus.

Most people infected with the COVID-19 virus will experience mild to moderate respiratory illness and recover without requiring special treatment. Older people, and those with underlying medical problems like cardiovascular disease, diabetes, chronic respiratory disease, and cancer are more likely to develop serious illness.

Around the World

Celebrity News

> Latest News in Media

Watch It
Arnold Schwarzenegger Recovering Well After Another Heart Surgery | TMZ TV
October 27, 2020
0kKv4bsg-CM
Offset Cuffed Then Released After Run In with Pro Trump Crowd | TMZ TV
October 27, 2020
qY-fHxGEt_s
Jennifer Aniston Says Don't Vote Kanye West, 'It's Not Funny' | TMZ TV
October 27, 2020
f0hbBJzSyxY
Gwen Stefani & Blake Shelton Are Engaged! | E! News
October 27, 2020
X9IdVVW7KCs
Cardi B Slams Racist Claims About Her Birkin Bags | E! News
October 27, 2020
dRjULO-rMAM
Kim Kardashian's Luxury 40th Birthday Celebration | E! News
October 27, 2020
LpW9CKVaZK0
Olivia, Sophia and Aurora Culpo on sharing clothes and their new fashion line | Page Six News
October 27, 2020
1rj8Oy1Q9iM
‘RHOC’ alum Vicki Gunvalson addresses Steve Lodge breakup rumors | Page Six Celebrity News
October 27, 2020
q2hWzuxekUw
Kanye West reacts to Jennifer Aniston saying not to vote for him | Page Six Celebrity News
October 27, 2020
9jg_X_6a-B8
Nicole Kidman & Hugh Grant on Becoming a 'Sexy' Couple for 'The Undoing'
October 26, 2020
VQz_8ZvaSb0
Aloe Blacc: Live from My Den
October 23, 2020
-ol2cCTBZeI
Tyler Perry on Producing During the Pandemic and Weighing In on Politics
October 23, 2020
GCtEmmdmAz0
TV Schedule
Late Night Show
Watch the latest shows of U.S. top comedians

Sports

Latest sport results, news, videos, interviews and comments
Latest Events
27
Oct
ENGLAND: Championship
Swansea City - Stoke City
27
Oct
ENGLAND: Championship
Swansea City - Stoke City
27
Oct
ENGLAND: Championship
Wycombe Wanderers - Watford
27
Oct
ENGLAND: Championship
Wycombe Wanderers - Watford
27
Oct
ENGLAND: Championship
Middlesbrough - Coventry
27
Oct
ENGLAND: Championship
Middlesbrough - Coventry
27
Oct
ENGLAND: Championship
Blackburn - Reading
27
Oct
ENGLAND: Championship
Blackburn - Reading
27
Oct
ENGLAND: Championship
Brentford - Norwich City
27
Oct
ENGLAND: Championship
Brentford - Norwich City
27
Oct
ENGLAND: Championship
Barnsley - QPR
27
Oct
ENGLAND: Championship
Barnsley - QPR
26
Oct
ITALY: Serie A
AC Milan - Roma
26
Oct
ENGLAND: Premier League
Burnley - Tottenham Hotspur
26
Oct
ENGLAND: Premier League
Brighton - West Bromwich Albion
26
Oct
GERMANY: Bundesliga
Bayer Leverkusen - Augsburg
26
Oct
SPAIN: La Liga
Levante - Celta Vigo
25
Oct
ENGLAND: Premier League
Arsenal - Leicester City
25
Oct
ITALY: Serie A
Juventus - Verona
25
Oct
ITALY: Serie A
Benevento - Napoli
25
Oct
ENGLAND: Premier League
Southampton - Everton
25
Oct
SPAIN: La Liga
Real Sociedad - Huesca
25
Oct
GERMANY: Bundesliga
Wolfsburg - Arminia Bielefeld
25
Oct
GERMANY: Bundesliga
Werder Bremen - Hoffenheim
25
Oct
ENGLAND: Premier League
Wolves - Newcastle United
25
Oct
SPAIN: La Liga
Getafe - Granada CF
25
Oct
ITALY: Serie A
Fiorentina - Udinese
25
Oct
SPAIN: La Liga
Cadiz - Villarreal
25
Oct
ITALY: Serie A
Parma - Spezia
25
Oct
SPAIN: La Liga
Real Valladolid - Alaves
25
Oct
ITALY: Serie A
Cagliari - Crotone
24
Oct
ENGLAND: Premier League
Manchester United - Chelsea
24
Oct
SPAIN: La Liga
Barcelona - Real Madrid
24
Oct
GERMANY: Bundesliga
Borussia Dortmund - Schalke
24
Oct
GERMANY: Bundesliga
Bayern Munich - Eintracht Frankfurt
24
Oct
ENGLAND: Premier League
Liverpool - Sheffield United
24
Oct
SPAIN: La Liga
Atletico Madrid - Real Betis
24
Oct
ENGLAND: Premier League
West Ham United - Manchester City
24
Oct
ITALY: Serie A
Genoa - Inter Milan
24
Oct
ENGLAND: Championship
Huddersfield - Preston NE
24
Oct
ENGLAND: Championship
Bristol City - Swansea City
24
Oct
ENGLAND: Championship
Coventry - Blackburn
24
Oct
ENGLAND: Championship
Sheffield Wednesday - Luton
24
Oct
ENGLAND: Championship
Millwall - Barnsley
24
Oct
ENGLAND: Championship
Stoke City - Brentford
24
Oct
ENGLAND: Championship
Norwich City - Wycombe Wanderers
24
Oct
ENGLAND: Premier League
Fulham - Crystal Palace
24
Oct
ITALY: Serie A
Lazio - Bologna
24
Oct
SPAIN: La Liga
Sevilla - Eibar
24
Oct
SPAIN: La Liga
Osasuna - Athletic Bilbao
21
Oct
CHAMPIONS LEAGUE: Group stage, Group A
Bayern Munich - Atletico Madrid
21
Oct
CHAMPIONS LEAGUE: Group stage, Group B
Inter Milan - Borussia Monchengladbach
21
Oct
CHAMPIONS LEAGUE: Group stage, Group D
Ajax - Liverpool
20
Oct
CHAMPIONS LEAGUE: Group stage, Group H
PSG - Manchester United
20
Oct
CHAMPIONS LEAGUE: Group stage, Group G
Barcelona - Ferencvaros
18
Oct
ITALY: Serie A
Roma - Benevento
18
Oct
ENGLAND: Premier League
Tottenham Hotspur - West Ham United
17
Oct
GERMANY: Bundesliga
Arminia Bielefeld - Bayern Munich
17
Oct
ENGLAND: Premier League
Newcastle United - Manchester United
17
Oct
SPAIN: La Liga
Getafe - Barcelona
17
Oct
ITALY: Serie A
Crotone - Juventus
17
Oct
SPAIN: La Liga
Real Madrid - Cadiz
Find us on Instagram
at @feedimo to stay up to date with the latest.
Featured Video You Might Like
zWJ3MxW_HWA L1eLanNeZKg i1XRgbyUtOo -g9Qziqbif8 0vmRhiLHE2U JFCZUoa6MYE UfN5PCF5EUo 2PV55f3-UAg W3y9zuI_F64 -7qCxIccihU pQ9gcOoH9R8 g5MRDEXRk4k
Copyright © 2020 Feedimo. All Rights Reserved.