From Mike Whitney:<\/p>\n\n\n\n
The media would like to believe the Fed is doing everything in its power to fight inflation, but it\u2019s not true.Yes, the Fed raised rates by 50 basis points in May and, yes, the Fed is trying to sound as \u201chawkish\u201d as possible. But these things are designed to dupe the public not to reduce inflation. <\/p>
Let me explain.<\/p>
The current rate of inflation in the US is 8.6%, a 40-year high.At its May meeting, the Fed raised its target Fed Funds Rate to 1%.Got that? So the Fed\u2019s rate is still a measly 1%. That\u2019s what the media is trying to hide from you, and that\u2019s why you might have to read 9 or 10 articles before you find a journalist who provides you with the actual rate.<\/p>
Why are they hiding the rate?<\/p>
Because the rate is 7.6% below the rate of inflation, so it doesn\u2019t do a damn thing. It\u2019s another public relations travesty dolled-up to look like serious monetary policy. But it\u2019s a joke, and you can see it\u2019s a joke.Think of it like this: If I loaned you $100 at 1% interest\u2013 but inflation was running at 8%\u2013 I would lose 7 bucks per year, right?<\/p>
Right. And that\u2019s what the Fed is doing. When interest rates are set below the rate of inflation, then the Fed loses money on every loan. In other words, the Fed is providing a subsidy to the banks for borrowing money. Have you ever heard of anything so ridiculous?<\/p>
How would you like a deal like that? How would you like it if the Fed paid you interest on your credit card debt? You\u2019d probably like that, right? But\u2014if you were honest with yourself\u2014you\u2019d admit that it was a \u201cgift\u201d, because that\u2019s what it is, a gift. The big banks are getting another handout from Uncle Sugar. That\u2019s the whole deal in a nutshell.<\/p>
Meanwhile, you and I and the other 300 million serfs, continue to pay a hefty 18% to the banks that are being subsidized by the Federal Reserve. Sound fair?<\/p>
So, how much would the Fed have to hike rates if it really wanted to do its job? Check out this clip from an article at the Chicago Booth Review:<\/p>
\u201cThe usual wisdom says that to reduce inflation, the Fed must raise the nominal interest rate by more than the inflation rate. In that way, the real interest rate rises, cooling the economy.<\/p>
At a minimum, then, according to the usual wisdom, the interest rate should be above 8.5 percent. Now. The Taylor rule says the interest rate should be 2 percent (the Fed\u2019s inflation target), plus 1.5 times how much inflation exceeds 2 percent, plus the long-term real rate. That means an interest rate of around 12 percent. Yet the Fed sits, and contemplates at most a percent or two by the end of the year.\u201d Source: \u201cWhy Hasn\u2019t the Fed Done More to Fight Inflation\u201d Chicago Booth Review<\/p>
So if the Fed was serious about fighting inflation, they would have raised rates to roughly 12%. Instead, they have decided to use their allies in the media to pull the wool over everyone\u2019s eyes. That\u2019s what\u2019s going on. <\/p>
It\u2019s another big snow-job.<\/p>Mike Whitney, “The Fed isn’t Fighting Inflation, It’s Fueling It” at https:\/\/www.globalresearch.ca\/fed-isnt-fighting-inflation-its-fueling-it\/5783353<\/a><\/cite><\/blockquote>\n\n\n\n
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Including the Federal Reserve’s “fight” against inflation From Mike Whitney: The media would like to believe the Fed is doing everything in its power to fight inflation, but it\u2019s not true.Yes, the Fed raised rates by 50 basis points in … Continue reading