The Federal Open Market Committee released its latest statement on monetary policy.  The Fed will keep its target rate unchanged, in a range of 3.5% to 3.75%.  The vote was 9 – 3.  The 3 dissenting votes wanted to raise the federal funds rate by 25 basis points.

Typically, when the FOMC has a meeting with an announcement of its policy, the market knows what is going to happen.  In some ways, the Fed actually follows market expectations.  It was not as clear cut for this latest meeting.

Just the fact that there were three dissenters and nobody favored a rate cut tells us that Fed officials are concerned about the continued elevated price inflation.

Let’s remember that it wasn’t long ago that Trump was criticizing “Too Late” Powell for not lowering interest rates.  The Trump lackeys that were appointed were favoring lower rates.  Yet, now they are not favoring lower rates.  This means they would have clearly been wrong (according to their own standard) if rates had been lowered earlier this year.

It is also funny that Kevin Warsh feels the need to say that the Fed will do everything necessary to fight inflation (while still inflating) and saying that the Fed is not accepting price inflation above 2%.  Warsh is trying to get some confidence back in the U.S. dollar.  But if Warsh really wants to bring confidence back to the U.S. dollar, he should stop inflating the money supply, and he should tell the government to get spending under control and to stop running massive deficits.

Meanwhile, Trump is holding his fire on the new Fed chair that he just appointed.  Trump will come up with some nickname for Warsh when the economy goes bad.  Trump will blame anyone but himself, even though he appoints the people that he later turns on.

Market Reaction

U.S. stocks took a big hit on the day.  But it is noteworthy that the markets were already down before the Fed announcement.  They actually started to come back immediately after the FOMC announcement, but then went to new lows later in the afternoon.

Gold and silver finished the day higher, although the metals have taken a beating over the last several months.

Perhaps the most notable thing was bond yields.  The 10-year yield finished the day at 4.67%.  The 30-year yield hit 5.20%.  Short-term rates actually fell a little bit.

The yield curve that was inverted in 2023 and 2024 is no longer.  It has mostly normalized in the sense that long-term rates are higher than short-term rates.  Inverted yield curves have typically been a predictor of recessions after the yield curve normalizes.

While many Americans feel like they are in a recession because their wages aren’t keeping up with their expenses, we have not yet entered an official recession.  Unemployment is still relatively low, and stock indexes are near all-time highs.

Recession?

Has the yield curve as a recession predictor failed this time?  If it hasn’t failed, then we should be seeing a recession soon.

If we hit a deep recession, who knows how the Fed will react if price inflation is still above 2%?  The Fed will bail out the major financial institutions and the bond market if necessary, just as it always has.  The Fed will not bail out the stock market by itself.

If we get a deep recession, we can only imagine the executive orders (dictates) coming from Trump.  He will try more tariffs and come up with a bunch of other socialist schemes while trying to blame the so-called Democratic socialists.  Meanwhile, the left will blame it all on free market capitalism.

It’s good to be a libertarian and understand free market economics, but sometimes it would be easier to live in a state of naivety.  

There was an article published on July 7, 2026 with the title “Average new car payment reaches all-time high as affordability issues persist”.

Auto loan debt rose 57.3% from a decade earlier, but we have had a lot of money creation at the Fed to account for.

The stunning part for me was that the average monthly car payment is now a record $770 per month.  This is unbelievable.  That is around what my mortgage payment is if you don’t count insurance and taxes.

This is the average, so it would be swayed higher by really expensive car payments.  Still, it is not like there are a lot of Lamborghinis out there driving up the average.  The median car payment is probably not all that much lower than this amount.

Average monthly payments for a used car now stands at $531.  This is quite a staggering amount for vehicles that are already used and some of which don’t even have a warranty or may have a very limited warranty.

To be fair, this doesn’t account for people who just pay cash for a car.  But these tend to be the people who are in good shape financially.  And this leads to the bleak picture of those who are getting big car loans.

Sub-Prime

The article points out that “nonprime borrowers” – those with a credit score in the range of 601 to 660 – account for the group with the highest average auto payment of $811 per month.

Sub-prime borrowers (credit score of 501 to 600) are not far behind this group with an average of $792.

Meanwhile, the super-prime borrowers (781 to 850) had the lowest monthly payment of $753.

This tells us several things.  First, even though we are in a really tough economy, and we can place that blame on the government and central bank, we still have to acknowledge that some people are in the position they are in because of bad choices.

Most people just need a car to get from A to B.  Maybe some construction workers need a big pickup truck.  Maybe some people need a nice car if they have to drive clients around.  But for the majority of people, they just need the transportation.

It is ridiculous that someone with bad credit would be buying a car that requires a monthly payment in the neighborhood of $800 per month.  You can still buy a new car for under $25,000, although there aren’t a lot of them these days.  It is quite realistic to buy a new car and have a monthly payment under $500.

Another thing these statistics tell us is that there is a large segment of the population that is vulnerable to an economic downturn.  They are already struggling.  If unemployment goes significantly higher, or even if interest rates go higher, some of these people are no longer going to be able to meet their obligations.  If there is any kind of financial crisis like 2008, we are going to see a major spike in defaults.

The Misallocated Economy

The fact that sub-prime borrowers and non-prime borrowers have the highest monthly auto payments is representative of the economy we are in.  The rich get richer, while the poor keep getting buried deeper.

This is, of course, a generalization.  And as discussed, some of this is due to choices.  The people with money keep making good decisions, which is largely the reason they have money in the first place.  The people without money keep making bad decisions.

Still, I can’t help but sense that this is more pronounced than normal.  The economy is working for some Americans, while it is most definitely not working for others.  And even if it is seemingly working for some, most people would be vastly better off if the government were a fraction of its current size and if the Fed kept a relatively stable monetary policy.

The higher car prices, the higher interest rates, and the all-time high monthly payments are representative of this economy.  And for both, something has to give.  The current trajectory is unsustainable.

The average car payments is depressing enough on its own.  Unfortunately, it paints a bigger picture that needs to be addressed.  We need less debt, drastically lower government spending, less government regulation, and a central bank that doesn’t inflate like crazy.  Even better, we could have no central bank and let the market take care of our money and interest rates.

The latest CPI numbers were released for June 2026. The CPI was down 0.4% for the month. This was largely due to the reduction in oil/ gas prices.

The annual CPI now stands at 3.5%, which is still well above the Fed’s supposed target of 2%. The median CPI is at 2.7% year-over-year.

While this is a little bit of welcome news for consumers, there is still a lot to be pessimistic about. The energy prices are largely dependent on what is happening in Iran and the Strait of Hormuz. Good luck trying to predict anything that is going to happen there. Donald Trump doesn’t know what he’s going to do tomorrow.

The bigger picture with inflation is what the Fed is going to do and how much it will continue to help Congress fund the massive deficits.

Warsh Speaks as a Hawk

It has been surprising how much Kevin Warsh has sounded like a hawk. (It is all relative.)

Warsh will actually say that it is primarily monetary policy that drives inflation over the longer run. Of course, what the Fed does is inflation. It is the Fed that engages in monetary inflation. What Warsh is saying is that it is monetary inflation that ultimately causes price inflation.

Let’s remember that it wasn’t long ago that Trump was heavily criticizing Jerome Powell as Fed chair. He called him “Too Late Powell”, and that was perhaps one of the nicer names.

In terms of rhetoric, Warsh has been much more of a hawk than Powell. Warsh is talking tough about doing everything needed to tame price inflation.

Maybe these are just words. Maybe Warsh and Trump have a quiet agreement. Warsh will talk tough on inflation while keeping a relatively loose monetary policy.

I saw some portions of Warsh getting questioned in the Senate. Most of it was just a political show. I won’t I say don’t care about possible corruption and influence peddling at the Fed, but the whole entity is that. It is an organization that has been given a monopoly power over the money supply of the nation. It was born out of corruption and influence peddling.

The Road Ahead

It’s possible Warsh is serious about getting price inflation back to 2%. We know the Fed isn’t going to pursue price inflation of 0%, even though it should. We know the Fed isn’t going to be abolished any time soon. So, given the alternatives, 2% price inflation sounds nice these days.

The problem is that the government keeps spending money like crazy. The deficit continues to grow, even during a time of relatively low unemployment.

We haven’t seen a prolonged recession in 18 years. It’s hard to say if 2020 was a recession because of the lockdowns. It was also averted because the Fed created massive monetary inflation right from the beginning of the lockdowns, or even a few weeks before.

If we get a recession resembling 2008, we really have no idea how the Fed will react. We can assume that the Fed will not let any major financial institutions fail. We can assume that the Fed will not let the bond market collapse. Other than that, we really don’t know.

I’m not sure why, but I take Warsh a little bit seriously that he wants to get price inflation down. I don’t think Trump is in charge here. The Fed doesn’t want the dollar to sink in foreign markets because it would compromise the power of the U.S. government.

I can envision the Fed actually raising its target interest rate while still gradually increasing its balance sheet. It’s a seemingly contradictory policy, but that hasn’t stopped the Fed before.

Again, if we hit some kind of financial crisis, then all bets are off. For now, I would bet on a somewhat neutral Fed policy to the degree that’s possible. Maybe we’ll see one rate hike. The balance sheet will likely level off with a very gradual increase.

Iran has effectively won the war that was started against them by the United States and Israel.  The people who were killed and those close to them obviously didn’t win.  But in terms of state vs. state, Iran won.

All you have to do is look at the so-called Memorandum of Understanding (MoU).  For the parts in the MoU that Iran has to fulfill, Iranian officials were already willing to do before the war started.

For the parts of the MoU that the U.S. state must fulfill, they are above and beyond anything that would have been considered before the war started.

Some of the MoU is similar to the JCPOA, which Trump tore up during his first term in office.  Primarily, Iran must get inspections to ensure they are not building a nuclear weapon.

The things that are different are all in Iran’s favor.  Iran will somehow get $300 billion, which is likely more than their entire economy produces in a single year.  Iran will control the Strait of Hormuz and will likely continue to collect tolls or fees or whatever you want to call them.  In addition, U.S. forces are supposed to withdraw from the immediate region, although we don’t know what that specifically means.  To top it off, Israel is supposed to withdraw from Lebanon.

Now, you may say that this won’t go through and the Israelis won’t abide by the agreement.  Maybe the U.S. won’t abide either.  But then why did Trump ever come to any such agreement in the first place?  If it was just to give time to replenish missiles and military power, it just shows how weak and unprepared the military was for this adventure.

If it falls through just because Israel sabotages the deal, it still shows that Trump was essentially forced to admit defeat without actually saying so.

Reality Hits

Some kind of mature adult must have finally gotten Trump’s ear.  Maybe it was Vance, but who knows.  Trump must have been told that the U.S. bases in the region have sustained significant damage.  He must have been told that there is no way for the U.S. military to effectively open up the Strait of Hormuz, which was always open prior to this foolish war.  Trump must have been told that the war is unpopular with the American people and that this misadventure will get the blame for any kind of economic recession.

Many of us saw this reality when the war started, or even before the war started.  Iran had already demonstrated its missile power in 2025 when Israel (and then the United States) attacked it.

When people talk about how Iran is winning the war, this is sometimes portrayed as people cheering for Iran.  But it is really just facing reality.

If your friend is driving 100 mph towards a cliff, and he says he is headed towards Disney World, it doesn’t mean you are cheering for bad things to happen just because you point out that there is a cliff ahead.  It is dealing in reality.

Cheering for Iran?

Aside from the reality, some people in the West really are cheering for Iran.  But this doesn’t make one a traitor to the U.S.  It doesn’t make someone anti American.  Also, it really isn’t cheering for the Iranian state.  It is cheering against people who initiate war.

It isn’t the American people losing with an Iranian win.  The American people are losers for the war ever starting, just as the Iranian people are.  But most Americans, other than a tiny few military personnel, are not physically hurt in any way by the war.  That isn’t quite as true for Israelis.

The American people are losers in terms of lost liberty and a lower standard of living than they would have otherwise had.  But that is because of the war being started.

If anything, Iran essentially winning the war and holding the cards in the negotiations is a win for the American people because it is a defeat for the evil establishment in the United States.

Donald Trump deserves to go down in history as a horrible president and a horrible person.  The neocons that he cozied up to deserve to be known as a bunch of losers and cowards.  Most of all, they all deserve to be known as evil.

The Benefits to the American People of an Iranian Win

Imagine if this attack against Iran had been successful from the viewpoint of Trump and his war hawk advisors.

We saw what happened after Venezuela was a seeming cakewalk.  Trump was ready to take over the world.  Let’s remember Canada and Greenland.  They are still talking about Cuba even with the humiliating defeat in Iran.

Trump, Netanyahu, and the war hawks were ready to take over the entire Middle East and then some.  Paying $300 billion to Iran seems like a bargain to the American people to get out of this thing.

The American people win when the U.S. empire is weakened.  The American people win when the establishment suffers humiliation.  In this sense, an Iranian win in this war is actually something of a victory for the American people.

The war should have never happened in the first place.  But since we have a bunch of evil people in charge of foreign policy, it did happen.  The bullies finally got put in their place for once.

In order to understand the winners and losers, you have to differentiate between the people and the government.

The enemy of the American people is not the Iranian state.  The enemy of the American people, whether they realize it or not, is their own government, particularly when it comes to foreign policy.  When the government loses, the people tend to win.  That is because the average person benefits when the state that rules over them loses some power.

This is not always true, but we need to stop thinking of the state as “we the people”.  Our interests are not the same as Donald Trump, Joe Biden, or Marco Rubio.  In many cases, they are the exact opposite.

The United States of America celebrates its 250^th birthday on July 4, 2026.  It is interesting that we celebrate the birth of our country on July 4^th.

On July 2, 1776, the 13 colonies under British rule voted to separate from the British crown.  The Declaration of Independence was officially adopted on July 4, 1776.

I say it is interesting that we celebrate this as a birthday because it was a day in which the colonies declared secession.  That is what independence meant.  It was a secessionist movement.  When people today talk about secession, it is often called unpatriotic, yet that is exactly what the American colonists did.

Some will argue that the American secession was different because it was a secession from a king.  Today, we live in a “democracy” (which is actually supposed to be a constitutional republic).

But it is hard to believe that the colonists wouldn’t have tried to secede if only they had the right to vote.  It is an issue with tyranny.  And while there was certainly tyranny coming from the British crown, we have our own share of it today.  If you look at the economic picture, the British tyranny of 1776 was almost nothing as compared to today.

The government at all levels consumes something like 40% of our earnings today.  In the American colonies, the British crown collected somewhere in the neighborhood of 1%.

But the really interesting part of the American birthday celebration is that it is based on the Declaration of Independence.  It isn’t based on when the war was won or when the war ended.  It wasn’t based on when Britain formally recognized the colonies as independent states.  The colonists declared independence on July 4^th, but the actual independence came later.

Our Liberty and Our Tyranny

I have mixed emotions about July 4^th and the celebrations that go with it.

For part of me, the cranky libertarian comes out asking why all of these people are ignorantly celebrating our freedom when we have so much tyranny.  Are these people celebrating paying 35 to 40 percent of their earnings (directly and indirectly) towards government when the British collected about 1% from the colonists?  Bring me back to 1776 with today’s technology.

Are they celebrating the American empire that has military presence in the majority of countries on the planet?  Are they celebrating the NSA spying on us?  Are they celebrating the wars and bombings in other countries?  Are they celebrating our government-run schools?

On the other hand, there is the more generous view of Americans.  I can appreciate that we do celebrate a day of secession even if many people don’t exactly recognize it as such.

I can also appreciate that there is still a certain American spirit that hasn’t died.  Americans are still quite individualistic as compared to much of the rest of the world.  Americans will dance to the beat of their own drum and generally insist that they have a right to do so.  There is a certain lack of obedience to authority.

There are a lot of problems in America with crime, drugs, homelessness, and a somewhat tyrannical government.  But in spite of all that, there is much to celebrate.  Americans, for the most part, are quite charitable.  We still have an economy where entrepreneurship is celebrated, and it is acceptable to make money in exchange for helping others.  This should not be ignored.

When politicians do bad things, they don’t generally announce they are doing bad things.  They try to get the support of the American people by appealing to their humanity.  They can only get away with welfare and warfare by doing it in the name of helping people, even if it isn’t true.

Celebrate

While I may gripe a little and point out the great liberty that we have lost, I will still celebrate on July 4^th.  You probably won’t sell a message of liberty by being a crank and ruining a good time for others.

There is much to celebrate.  We live in a good time even though it could be a lot better.  We can celebrate looking forward to a time of greater liberty in the future.