{"id":4325,"date":"2023-07-20T15:12:48","date_gmt":"2023-07-20T15:12:48","guid":{"rendered":"https:\/\/wifamily.news\/?p=4325"},"modified":"2023-07-20T16:01:14","modified_gmt":"2023-07-20T16:01:14","slug":"how-the-fed-is-about-to-push-the-private-sector-over-the-cliff","status":"publish","type":"post","link":"https:\/\/wifamily.news\/?p=4325","title":{"rendered":"How The Fed Is About to Push the Private Sector Over the Cliff"},"content":{"rendered":"

This post originally appeared at https:\/\/www.wisconsinrightnow.com\/how-the-fed-is-about-to-push-the-private-sector-over-the-cliff\/<\/a><\/p>\n

\"the<\/p>\n

The Fed: First they over loosen, printing $6 trillion in new capital and lowering interest rates to near zero. Then they wait too long to change their policy. Then they raise rates too fast for businesses and banks to react, bankrupting three large banks. Now they\u2019re about to over tighten, and push the private sector over the cliff.<\/p>\n

The Fed is a car braking on ice, and you know what happens \u2013 the car skids out of control because of over-braking. What the Fed should be doing is pumping the brakes and turning into the skid, but they\u2019re panicked due to the high inflation they caused.<\/p>\n

Of course, we\u2019ve seen this car wreck before. The Fed has a long history of getting it wrong, always over loosening, then waiting too long and then over tightening. You\u2019d think they would have an institutional memory to avoid repeat cycles of boom and bust. Hell, if they would just hold interest rates and the money supply steady, the economy could avoid swinging from one extreme to another. Reagan had it right; hold to a stable monetary and fiscal policy and lay down a steady foundation for the economy to work off of, given us 25 years of a steadily improving economy.<\/p>\n

What the Fed\u2019s open market committee doesn\u2019t seem to understand is that raising interest rates sky high won\u2019t affect government and school spending at all, but it will crush small businesses. $1.5 billion of school referendums were approved in 2022 in Wisconsin alone and all that spending is kicking in in 2023 and will continue until the construction is done in the summer of
\n2024. That has put record upward pressure on construction material pricing, and no amount of Fed pressure is going to change that. Governments and schools keep spending regardless of interest rates, but private sector businesses can\u2019t do that.<\/p>\n

Inflation is caused by the increase in the money supply and government spending. Inflation has always been a result of the money supply. Crushing the private sector with super high interest rates won\u2019t alter the results. But inflation will float down over time as firms ramp up production and rebuild inventories following the government ordered COVID shutdowns. (I called it \u2018shut
\ndown and shut up\u2019 because that\u2019s what they wanted.) <\/p>\n

Admittedly, inflation won\u2019t really settle down to below 2% until mid-2024 when the government purchases slow down. Killing off the private sector will bring down inflation some, but that\u2019s not the primary cause, so inflation will probably remain above 2% into 2024. In the meantime, prices will adjust to absorb all those extra dollars.<\/p>\n

But then, the Fed should not be expecting or setting 2% as its inflation target. You can\u2019t just jump off a cliff. You have to carefully climb down. In other words, the Fed\u2019s target for 2022 could have been something like 6%, then step it down to 4% in 2023, and then 3% in 2024 and 2% in 2025. That would make sense, but the Fed never worries about reality or what makes sense; they just plow ahead in their own little unreality world.<\/p>\n

And that\u2019s why the private sector keeps getting hammered every ten years as the Fed swings the economy back and forth. They can\u2019t ever accept that it\u2019s their own behavior that causes all this \u2013 causes inflation, causes recessions, causes banks to collapse, causes the stock market and crypto currency speculation to stay high (due to excess liquidity), etc. It\u2019s not the private sector. <\/p>\n

Example \u2013 those banks collapsing was caused by the government telling them to buy treasury bonds as a safe place to park capital, and they were given an incentive to do so. Then the Fed rockets up interest rates while banks are sitting on those same bonds at low rates causing losses in their investment portfolio that jeopardizes their capital stack. Who\u2019s fault is
\nthat?<\/p>\n

My advice to the Fed is this. Stop printing excess money. Maintain a steady money supply. Maintain stable interest rates. Don\u2019t crash the economy to bring down inflation; inflation will come down after the government spending is done. Set stepped inflationary targets by year.<\/p>\n

Don\u2019t expect immediate results; slowing a freighter on Lake Michigan takes over a mile \u2013 it can\u2019t happen any faster even if there is sailboat crossing its path. And stop blaming the private sector for your own mistakes. You caused this. Don\u2019t destroy people\u2019s livelihoods and their lives because of your mistakes.<\/p>\n

T. Wall holds a degree from the UW in economics and an M.S. in real estate analysis and valuation and is a real estate developer. Disclaimer: The opinions of the writer are not necessarily those of this publication or the left!<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

This post originally appeared at https:\/\/www.wisconsinrightnow.com\/how-the-fed-is-about-to-push-the-private-sector-over-the-cliff\/ The Fed: First they over loosen, printing $6 trillion…<\/p>\n","protected":false},"author":39,"featured_media":4327,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-4325","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-wi-right-now"],"_links":{"self":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/4325","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/users\/39"}],"replies":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4325"}],"version-history":[{"count":2,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/4325\/revisions"}],"predecessor-version":[{"id":4328,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/posts\/4325\/revisions\/4328"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=\/wp\/v2\/media\/4327"}],"wp:attachment":[{"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/wifamily.news\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}