The current political divide between the leading parties is not rooted in fundamental principles but rather in competing strategies to achieve goals with minimal sacrifice. For lawmakers, the agenda revolves around promising the public something for nothing while feigning transparency in delivering it.
Consider the latest tax legislation: the GOP is focused on lowering taxes while increasing spending, whereas the Democrats advocate for higher taxes alongside even greater spending. Notably absent are proposals advocating for reduced taxes, decreased spending, and a smaller government. But why would such proposals emerge?
Today’s central planners and social engineers consider themselves to be progressive and enlightened. They believe they possess superior knowledge about how to manage resources, particularly your financial resources.
At best, central planners redirect your funds to Washington, ostensibly to distribute them back to your community. In reality, however, these funds often end up benefiting their own networks, not yours. This is not speculation; it’s a clear fact.
Is it just a coincidence that the three wealthiest counties in the United States lie in the shadows of the Capitol in the D.C. suburbs? The tangible value generated by residents of these counties is questionable. What is evident, however, is that ample government positions in Loudoun and Fairfax counties pay astonishingly well. But that’s just the tip of the iceberg…
Garbage In Garbage Out
Further north on the East Coast, Wall Street is thriving as well. Big bankers and brokers prosper by extracting capital from small-town America. Is this characterization unfair?
Perhaps these financial institutions genuinely excel at channeling capital to its optimal uses. Yet, it appears more likely they are gambling with others’ investments, collecting hefty fees regardless of the outcome. It’s always, ‘heads I win, tails you lose.’ Quite the lucrative fugazi operation, if you manage to get in.
At the heart of this system is the Federal Reserve. Through its “open market operations,” the Fed tips the balance in favor of Washington and Wall Street, creating an elegant yet deceptive process.
Behind the veil of poor economic data, the Fed’s economists generate misleading charts and graphs. These are essentially distorted representations of economic growth, consumer and producer prices, personal consumption expenditures, unemployment rates, and any other aggregate indicators deemed important. Such distorted representations play a crucial role in shaping the Fed’s monetary policy decisions.
Are these graphs signaling an uptick or a downturn in price inflation? How about GDP or the unemployment statistics? Are they moving in opposite directions or aligning?
The Federal Open Market Committee (FOMC) examines these questions approximately every six weeks, subsequently manipulating the nation’s money supply, occasionally pulling the rug out from under the financial landscape to produce graphs that suit their narratives. What are the implications?
The Rug Yank Phase of Fed Policy
To outsiders, the Fed’s economists and planners may seem like reputable professionals dedicated to the nation’s welfare. They attend economic conferences and forums, presenting their latest findings on theoretical topics like liquidity traps. Some of their reports even include footnotes, as if they’re contributing to a solid foundation of economic knowledge.
Beneath this facade of academic rigor, however, a different reality exists. Capital is artificially created, funneled to Washington and Wall Street, where it is spent as if it possesses real value.
Yet, this “value” is illusory. The influx of this make-believe money ultimately siphons wealth from the very workers and producers who generated it through their skills and labor.
Currently, we find ourselves in what can be termed the rug yank phase of the Fed’s monetary strategy. This is characterized by a cautious retraction of credit after a decade of unrestrained growth. This tightening phase inevitably threatens to destabilize financial markets and the broader economy.
Undoubtedly, monetary policy lacks precision; it’s more akin to rudimentary guessing, informed by committee interpretations of questionable data. This week, the FOMC raised the federal funds rate by 0.25 percent, bringing it to a range between 1.25 and 1.5 percent. This marks the third hike this year and the fifth in this current cycle.
In a related note, Janet Yellen delivered her final press conference as Chair of the Federal Reserve, although she will likely chair the upcoming FOMC meeting in late January. Her successor, Jay “Count Dracula” Powell, is poised to take over the reins of the central bank. The prevailing expectation is for Powell to continue Yellen’s path, which includes three quarterly hikes in 2018.
We extend our best wishes to Powell in his new role. However, we suspect he may inadvertently destabilize financial markets and the economy before his first year concludes. Following that, the real challenges will commence.
Sincerely,
MN Gordon
for Economic Prism
Return from The Rug Yank Phase of Fed Policy to Economic Prism
