Probably none of you, our faithful readers, bothered to read Fed chairman Jerome Powell’s explanation for raising interest rates last week. Nor should you.
But WE have to. Powell has it half right and half wrong. Yes, the Fed must take aggressive action now to extinguish 8 to 10% inflation. Bidenflation is a cancer cell killing prosperity in our economy. The purpose of a currency is to retain its value as a medium of exchange.
But Powell thinks that his best strategy to restore the past 38 years of relative stability is to torpedo the economy. Here are some of the choice statements made by the Fed chairman about inflation:
“We don’t know — no one knows — whether this process [rate hikes] will lead to a recession or, if so, how significant that recession would be.”
“How do we get rid of inflation? Supply and demand must get back into alignment, by slowing the economy”
“We want to see growth run below trend”
“We think we need to have softer labor market conditions”
“I wish there were a painless way to reduce inflation”
The Fed and its more than 100 PhD economists are dazed and confused.
We need to get back to growth ABOVE trend. Under Reagan, the combination of lower tax rates and less regulation combined with the Paul Volcker interest rate hikes broke the back of inflation. Prices came down as the growth of money was slowed and as the production of goods and services expanded greatly.
We had low inflation and high growth all at the same under Reagan, Clinton, and Trump. Austerity is NOT the solution for stagflation. Prosperity is.
