Guest post by Joe Hoft
The Fed and its Head – Jerome Powell – have mandates to”promote stable prices” and “maximum employment” and to ensure a “healthy economy”.
However, the Fed’s recent radical and consistent rate hikes are stalling the great Trump economy while working against their mandates.
The Federal Reserve states on their website that two of its functions are to conduct monetary policy and promote financial system stability.
But the Fed is currently not sticking to its mandates – Just look at the Fed’s rate increases this century and since President Trump won the 2016 election. The Fed lowered interest rates to 0% for the Obama Administration and kept these rates at 0% for the first 7 years of Obama’s time in office. Finally, the Fed increased the interest rates 0.25% in late 2015 for the only increase during Obama’s Presidency up to the 2016 election.
After President Trump won the November 2016 election, the Fed began a steady program of increasing interest rates. This program continues to this day and in total the Fed has increased rates 8 times since Trump won the Presidency. The rates now stand at 2.25% and as a result of these horrible and political policies, the Trump economy and Americans’ 401(k)’s are being devastated.
Top US economist Stephen Moore stated –
Unfortunately, if you cut engine power too far on a jetliner, it will stall and drop out of the sky.
On Wednesday, December 19, 2018, despite the numerous market-based alarms that were sounding in the cockpit, Chairman Powell and his co-pilots on the FOMC voted to raise the Fed Funds rate to 2.50%. This sucks more dollars out of the economy at a time when the world demanding more dollars – thanks to Trump’s Tax cutting and deregulation policies.
Chairman Powell has been entirely tone deaf to the financial markets he seeks to protect. The Dow Jones Industrial average, which had risen by 382 points on hopes that the Fed would listen to President Trump and stop cutting power, plunged by 895 points after the 2:00 PM announcement, and closed the day down 352 points (1.49%). Poof, trillions of dollars of wealth vanished.
Since its peak on October 3, which, not coincidentally, was right after Chairman Powell gave a speech suggesting that the Fed might be through tightening money, the Dow has fallen by more than 3,500 points [now 4,500]. Market fears about his bad judgment have cut the value of all U.S. stocks by about $4.5 trillion, which is enough to buy 16,000 Boeing 787 Dreamliners.
The Fed economists use twisted logic that the economy is “strong enough” to absorb the rate hikes – which is simply an admission that their policy will slow growth.
The markets were up nearly 50% since the President won the 2016 election. Then in early October, the Fed Chief announced more interest rate hikes. After that the markets collapsed. The markets were down about 20% by the end of 2018 and the Fed nearly put the US into a recession.
President Trump today again challenged the Fed. While China is doing all it can to protect its economy, the Fed is doing the opposite in the US –
China is adding great stimulus to its economy while at the same time keeping interest rates low. Our Federal Reserve has incessantly lifted interest rates, even though inflation is very low, and instituted a very big dose of quantitative tightening. We have the potential to go…
— Donald J. Trump (@realDonaldTrump) April 30, 2019
The Fed’s raising of interest rates are hurting average Americans’ 401k’s while increasing the US debt –
….up like a rocket if we did some lowering of rates, like one point, and some quantitative easing. Yes, we are doing very well at 3.2% GDP, but with our wonderfully low inflation, we could be setting major records &, at the same time, make our National Debt start to look small!
— Donald J. Trump (@realDonaldTrump) April 30, 2019
We noted this in December. The Fed is adding billions to the annual US debt with their corrupt and crooked policy of raising rates on the Trump Administration.
The US debt now stands at $21.8 trillion.
A 2.25% interest increase on this amount of debt is an annual increase in debt interest payments of $500 billion!!!
Fed Chief Powell and the Fed have added a half a trillion to the annual US debt payment through their reckless and crazy debt increases!
In no way is the Fed currently sticking to its mandates. It is political. It is doing all it can to destroy or slow President Trump’s economy. The Fed should be shut down – End the Fed!
