The Federal Reserve announced on Monday that it will start buying individual corporate bonds.
The Fed has made a lot of unprecedented statements since March 2020. You can add this to the list of insanity coming in the form of monetary policy.
Of course, stock investors loved this news. This means that the Fed can create even more money out of thin air while also helping to prop up companies by buying their debt.
This is wrong on so many levels. It is wrong ethically. It is a further subversion of property rights. It is the central bank interfering with private business and deciding winners and losers. It subverts contract law. It encourages more lobbying and cronyism. It will massively misallocate resources, as companies that should go bankrupt will essentially be bailed out. In addition, it further distorts interest rates and our money.
The political left likes to complain about inequality and a lack of justice, yet where are they to be found in all of this? The answer is that they are mostly silent. It wouldn’t be a divisive enough issue for Americans. It doesn’t fit their narrative. The victim group is most Americans, which doesn’t serve their purpose.
The radical left will stay mostly quiet on this subject, while the more establishment left (and right) will quietly cheer this. They like being able to pick the winners and losers.
How will Jerome Powell and company pick which companies get their debt bought at generous rates? Will it just be companies that are failing and can’t find buyers of their bad debt at low interest rates? Will it include major corporations like Amazon and Apple? Will it include certain industries more than others?
Perhaps Powell and company at the Fed can look at a company’s corporate culture and determine who will get a bailout in the form of government loans. Perhaps if the corporate executives are willing to take a knee and set up a diversity committee, then they can be eligible for the Fed to buy their corporate debt.
This should really be a boon to lobbyists in Washington DC. I don’t know if the lobbyists will show up directly in front of the Fed or if they will just do their lobbying to other insiders who will pass along the messages to the Fed members of which companies get the bailouts.
This is more economic fascism. But the people who insist on calling themselves anti-fascist are not against this kind of fascism. I don’t even know that they are actually against the authoritarian fascism they have in mind except that they want different people in control of it.
As we continue to hear the media narratives about protests, riots, and the coronavirus, there is great damage being done to the American economy. There is great damage being done to the American middle class while they are distracted with culture wars.
This cronyism will continue to do great harm into the future. It is eroding contract law and private property rights. It is eroding the money we use. It will impact Americans in the form of lower real wages and a decline in living standards.
As I keep repeating, nothing is going to stop this except for the Fed not wanting hyperinflation. The only thing that is going to stop the Fed at this point is a significantly declining dollar. I don’t mean so much as against other currencies as I mean based on what your dollars can purchase. I believe it will take double-digit consumer price inflation in order to stop the massive money creation by the Fed and the massive spending coming out of Congress.
I don’t think I can be surprised any more from anything that is said or done by the Fed. But maybe I am not being imaginative enough. I have already underestimated the madness of the central bankers.