Guest Post by Paul Craig Roberts
Normally, recessions are the result of a reduction in liquidity by the Federal Reserve, the central bank, which is signaled by a rise in interest rates. Normally, recessions are short-run affairs of 6 to 9 months. Unemployment, which is as costly in its way as inflation, causes the Federal Reserve to relent and to increase liquidity, which is signaled by a reduction in interest rates.
This approach assumes that inflation is a monetary phenomenon–too much money chasing too few goods. But is the current inflation a monetary inflation? The Federal Reserve’s response to the financial crisis of 2008-2009, itself caused by the deregulation of the banking system, was to create $8.2 trillion in new money with which to purchase troubled bank investments that threatened the large banks’ balance sheets and transfer the troubled instruments to the Federal Reserve. This money did not go into consumer prices. Instead it drove up stock, bond, and real estate prices. The Fed stayed with this policy, which drove up the prices of financial assets, for over a decade, concentrating wealth in few hands.
The likely cause of the current inflation in US consumer prices is supply disruption. The Covid lockdowns and mandatory closing of businesses disrupted and destroyed supply chains. Shipping disruptions, which certainly reduce the supply of goods in an economy such as the United States, a country that has offshored so much of its manufacturing for internal markets, further reduced supply. Economic sanctions against Russia have destroyed business relationships. When too much money chasing too few goods is the consequene of supply reductions, not monetary growth, the problem needs to be addressed from the supply-side. Higher interest rates actually raise costs and further restrict supply.
According to the Atlanta Federal Reserve bank, the US economy is in a second quarter of negative economic growth, that is, the economy is declining, not growing. Deutsche Bank supports this view. Other large banks forecast a decline in growth. Recession will worsen supply shortages if it is accompanied by the normal reduction in domestic spending and layoffs of employees. In other words, the problem the US and associated economies face is not recession per se, but the Fed’s misunderstanding of the cause and utilization of a mistaken policy.
Even in its own terms, the Federal Reserve’s policy of restricting aggregate demand through higher interest rates will fail if it is offset by federal deficit spending, such as to finance Ukraine’s ability to wage war.
The Federal Reserve’s policy not only worsens supply aspects, but also threatens the accumulated wealth from years of high liquidity, as evidenced by the recent decline in stock and bond prices. If these reductions in the prices of financial assets threaten the banking, insurance, pension, and real estate sectors, the Federal Reserve will be forced to abandon its program of raising interest rates. If the supply issues are not addressed, fear that the Federal Reserve has lost control of inflation could result in financial panic that would be self-intensifying.
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.For all of PCR’s economic background and government experience, he has declined to acknowledge [or refute] the conclusion that the Fed is used by private firms to embezzle $4 billion DAILY from the US government. The accusations include the unchallenged premise that covert federal funds from the auctions of Treasury securities are exclusively handled by the FRBNY which have never been audited; that the embezzled funds have been laundered in BlackRock, Vanguard, and State Street; that they have also funded CIA corruption of foreign nations as detailed by Douglas Valentine in CIA AS ORGANIZED CRIME; that they have assisted the IMF in imposing on a multitude of nations; that the current IMF/Wall Street debt obligations on 86 nations which require the nation to impose a Covid lockdown will go to foreclosure if the global economy continues deterioration; that the Fed has added $16 trillion book-entry fiat credit in the economy over the recent 14 years to rescue bankers from default without government approval or any government benefit; that the Fed has blamed various presidents for the resultant inflationary actions; that the Fed appears to be deliberately following an agenda to destroy the global economy; that Powell’s recent “roll off” announcement is actually a notice of foreclosure on the USA; and that such funds have undoubtedly been available to Anthony Fauci, George Soros, Klaus Schwab, WEF and others for globalist projects.
Ref. https://genzconservative.com/the-federal-reserve-for-dummies/#_ftn3
Supply lines are only part of the problem. While it may be true that Fed interest rate raises could be offset/thwarted by more congressional “stimulus”, we’ll probably get that stimulus anyway. Everyone’s addicted to deficit spending and monetary expansion. That’s been enabled by the dollar-as-reserve-currency and outsourcing industrial production to places with cheaper labor and fewer environmental regulations. Both of those trends are waning if not coming to an end. Like all addicts, we need to “kick” or it will eventually kill us. How long “eventually” is is the question. I don’t know the answer, but we’ve been making a lot of enemies worldwide through our hegemonic bullying to maintain the status quo.
If we the governed rose up and eliminated central banks and then returned to either a gold or silver standard manipulation of the currency and economy, mistaken or otherwise, could not occur.
BOA (Bank of America … fedrescentralbank#3) constricts with coils & coils – massive coils, astronomical magnitudes of coils – of counterfeit cachet & company store pricing of that cachet which they refer to as “interest rates” … By which they mean that only their interests rate, & that everyone else exists to be berated into non-owning happi(less)ness.
This serpent has been on the ground here, in the gov here, from the founding “elite” get!-get!-get!. It isn’t “mistaken.” Its mission is taking.
If the money ain’t free market the legal tendered’s are marked-to-market. Citizen-chattel-cattle … “they thought they were free” … lower than slaves.
Mr. Roberts makes it seem as though the US Central Bank (the privately owned Federal Reserve Bank) just made a few honest errors; not that from its inception they’ve been manipulating the financial system. These banksters, not the congress critters, determine the currency supply and credit (usury) rates the engines that drive the US capitalist system. The Fed is so powerful no US president or the US Congress dares go up against them, (refer to the Zabpruder film as one example why https://www.youtube.com/watch?v=5GkpPfpyWdk)
We need truth to discern what is really going on, what is happening to us and the forces behind it all; not misdirection and disinformation. Inflation is a precipitous rise the money supply which has been going an since 9-11, especially so since the 2008 economic implosion (that the banks that own the Fed helped cause) and now the “pandemic” psyop that is taking down the economy. Follow the money https://techstartups.com/2021/12/18/80-us-dollars-existence-printed-january-2020-october-2021/.