While the Federal Reserve is political, I don’t view it as always siding with the Democrats. I don’t even see it as always siding with what is thought to be the establishment position. Sometimes there are different factions within the establishment that have different positions.
It is not easy to define the establishment, but it is largely made up of people who want to maintain the status quo because they benefit from maintaining the status quo. This could have to do with money or power or both. But there are often contradicting elements of maintaining the status quo for the elite.
The Biden crime family wants to maintain the status quo of staying out of prison, grifting money from Ukraine and wherever else, and holding on to some power. This is why Biden will go along with other establishment positions such as fighting a proxy war against Russia, forcing vaccines, and piling up more massive debt (just to name a few).
It is also clear that the media and Biden’s handlers can throw him under the bus at any time, so Joe Biden will mostly do what they tell him to do.
Jerome Powell and the other people at the Federal Reserve do not have the same goals as someone like Biden. They want to maintain the status quo of central banking and controlling money. I don’t think Powell really cares one way or another if Biden is impeached or in handcuffs. He probably doesn’t care about Trump either, especially after what Trump said about Powell after appointing him.
The Fed Isn’t Bothered by a Recession
It’s not that Powell and company want a recession. It is just that they are willing to accept a recession in order to keep the dollar as the number one currency in the world.
When the CPI recently dropped to 3% year-over-year, I thought the Fed was likely to pause and stay paused for a while. But the Fed hiked its target rate another 25 basis points, and it still may not be over. They are doing this in the face of a heavily inverted yield curve.
Fed officials obviously don’t care about Biden. They don’t have the same goals as Biden. If there is a recession in 2024 that leads to Biden’s defeat, then so be it. They care more about continuing to be the big dog in the future, even though the Biden administration is undermining that by isolating China and Russia from the U.S.
The Fed’s actions prior to this year set the course for higher price inflation and a massive misallocation of resources. The trouble is already baked into the cake. It is just a matter of how fast and deep the recession is that comes.
The Fed is not trying to delay this thing until after the 2024 election. If anything, they seem to be speeding it up.
Incompetence or Something Else?
I think people have a tendency to ascribe incompetence to politicians and government bureaucrats too much, when they should be ascribing evil.
Just about every single person the Biden administration appoints into any position of prominence is bad. It is just an assumption at this point. When there is a new CDC director (or name any position), you can be certain that the person is just terrible.
If Biden and his handlers were just a bunch of incompetent fools, then they might accidentally get something right every once in a while. But that doesn’t seem to happen.
In the case of the Fed, I really do think there is some incompetence at work. There is evil too, as they are knowingly centrally planning an economy. They know they are there to bail out the major banks if necessary.
But in the actions over the last few years, I really do have to ascribe some incompetence to the whole thing.
The Fed was expanding its balance sheet into the beginning of 2022. The Fed started raising the target federal funds rate almost immediately after its balance sheet reached its peak at almost $9 trillion.
If the Fed was competent and had any kind of foresight, wouldn’t there have at least been a brief period of time in there where it wasn’t doing anything?
It went straight from pushing hard on the accelerator to slamming on the brakes. There was never a time where it was coasting.
Looking Backwards
I bring this all up just to point out that the Fed is still hiking rates in the face of an inverted yield curve and a likely coming recession.
They didn’t care about price inflation at all in 2020, 2021, or the beginning of 2022. Then, all of a sudden, it was panic in the other direction. They are determined to get the rate of price inflation down, and I think they will be successful in the short run.
But it can turn on a dime and go back the other way. Earlier in 2023, when Silicon Valley Bank failed, the Fed expanded its balance sheet by a few hundred billion dollars in a short timeframe. In its quest to slowly drain the balance sheet, there was a blip upwards during this time.
Imagine what it will look like if a major bank were to fail.
The Fed is reacting to what happened in the past and not what will happen in the future. It’s not that they should know what will happen in the future, and it shouldn’t be left to any central planner to try.
But you would think the Fed would be able to see what is happening a little bit. Just as they missed the spike in consume price inflation that was coming in 2022, they are missing the major recession and the popping of the Everything Bubble that is coming.
When we hit some kind of financial crisis, the Fed will forget about price inflation again and start pumping new money in to bail out financial institutions and the bond market. It’s as if they can’t see it coming.
It’s a bad cycle that doesn’t stop, and it only seems to get more extreme each time.