President Trump nominated Jerome H. Powell as the new Chairman of the Federal Reserve Bank. Don’t look for much to change.
Where we are today is the culmination of decades of irresponsible financial/fiscal policies and a complete abdication of fundamental economics. But that should not be a surprise. The self-proclaimed purpose of the Federal Reserve Bank is to manage the economic cycles. This is an impossibly presumptive task and a violation of fundamental economic theory.
In addition, the Federal Reserve Bank is also charged with ensuring the financial operation of the U.S. Government. Or, in other words, maintaining their (the U.S. Government’s) ability to borrow money by issuing more and more debt in the form of Treasury securities. In my opinion, this is the sole and overriding purpose behind the existence of the Federal Reserve. And it drives every decision they make. It is not about the economic effects of their policies on US citizens (individually or collectively). It is all about keeping the U.S. government solvent.
The U.S. Government is not solvent, of course, but maintaining and reinforcing the confidence in their financial viability is absolutely essential. And nothing else takes precedence.
In the late 1970s the effects of government inflation threatened to cripple the US dollar and bring the US economy to its knees. U.S. Treasury Bonds were losing value faster than most stocks, which were also declining at precipitous rates. Actions taken at that time averted disaster – temporarily. We have had periods of relative stability since; as well as more volatility and financial crises. The cycle continues. And things will get worse.
The U.S. dollar is in a state of perpetual decline (by intention) which will ultimately end in complete repudiation. Whether or not the Federal Reserve continues to raise interest rates is not the real issue. They will do – or not do – whatever they think will keep the charade going for a while longer.
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