I think the Fed is intentionally harming the economy to make President Trump look bad. It is like all of the fudging of employment and economic data that the federal agencies are doing. And they have been fudging data to make democRATs look good and Republicans look bad for a long time.
A simplistic explanation of things can be stated with the Quantity Theory of Money:
MV = PQ
Where:
M = the Money supply (measure as M1 + M2)
V = the velocity of money (how fast money “circulates” and is fairly constant over the past 10 years
P = the price level (you want this to be constant)
Q = Gross National Product, or what’s produced by the system
Since V is virtually constant, and we want prices (P) unchanged, with Q going up by 3.3% per year, M needs to increase by a like about if prices are to remain stable.
Lowering the Federal Funds Rate is a step in the right direction, but is kinda like pushing on a string and expecting something to move. It is a “permissive” move in that it is the rate the Fed charges member banks to borrow money. The act of “going to the window” of the Fed to borrow money is viewed by the Fed as a bad thing for member banks to do. Instead, member banks will often borrow funds from other member banks overnight rather than go to the federal funds window. To the extent this happens, measured M doesn’t change. With a 3.3% growth rate, that’s going to put pressure on P.
In my mind, the Fed needs to put the 25 basis points sniper rifle away and take out small 50 basis points cannon.
I think the fed should be abolished or just separated from our gov which has the power to print money and manage that based on a basket of commodities. That said the Fed is no a jobs program for one easy reason. No one even knows what the job number are when they get revised, etc. fake numbers should not dictate monetary policy. And i’m not sure that inflation is tamed yet. And if the economy is booming then there is no need for rate cuts.
Goals for the Fed set by congress: 1) Price stability 2) maximum employment. GDP up or down is not part of the Fed’s mission. Increasing rate of pay is not a Fed goal. Pro or anti immigration is irrelevant to the Fed. Whether maximum employment is immigrants or citizens is irrelevant to the Fed goals set by Congress.
The only people the high prime rate hurt are the middle class and home builders when on the 30 year ladder climb of home ownership. The poor always get 26.5% rates, they have no ethical in modern use for credit.
If your a bond buyer you want them cheap for delivery back of your cash at some time in the future, that is a high rate.
If your a business owner, you can get the people who extend credit to your customer give you a bigger pure profit immediate retune with every sale. Sure your own barrowing is costlier, but ultimately that is a customer problem.
If your a banker or car loan sales, the scale is between the highest rate with the worst credit and the base of the prime rate, that scale has excuses to expand at 4.75 rates as opposed to 2.75. The sales side of those instruments there is more vig for sales incentives.
Farmers the weather is bigger factor than the 4% to 15% paid for things delivered before one sells/contracts their results.
I started reading and before the first sentence was done I thought, “This writer is an idiot!”
Then I noticed:
Larry Kudlow.
Never mind.
On the other hand, Powell stated earlier this year that there will be no central bank digital currency while he heads the Fed.
Powell is the one who destroyed Trump’s economy. He can KMA.
Powell is timid and that isn’t going to change. He has the backing of the rest at the FED. He will nibble at .25% per meeting unless things weaken faster, get used to it. His biggest backer is the stock market which is still slowly rising (and setting new record highs) during what is typically the slowest time of the year.
Powell’s term is up in January if I remember correctly so he will be gone. This is his final FU to Trump.
Powell hates Trump & his policies and is stymieing economic growth hoping to get Democrats back in power.
Worse for him, on top of his dirty FED regime, he’s dog-faced ugly.
All the blue city Fed governors won’t lift a finger.
.