After abandoning its view that inflation would be "transitional," the Fed had to aggressively catch up to counter high and damaging price increases. However, the central bank lagged far behind and is now forced to raise interest rates sharply amid slowing local and global economies. Thus, the once-idea of a "soft landing" has been replaced by the growing possibility of the US economy being pushed into recession, with the resulting damage spreading far beyond the US.
The Fed Is Finally Seeing The Magnitude Of The Mess It Created.
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why does inflation rate have to be 2%? is it a law in nature? no!
inflation rate in those big countries in Latin America such as Brazil, Mexico, Columbia, Argentia, Chile, India, Russia, Indonesia has been around 4% for the last 25 years. Mr. Powell, it's new millennium, new normal, let's get it down to 4%, and learn to live with it.
inflation rate in those big countries in Latin America such as Brazil, Mexico, Columbia, Argentia, Chile, India, Russia, Indonesia has been around 4% for the last 25 years. Mr. Powell, it's new millennium, new normal, let's get it down to 4%, and learn to live with it.
There doesn't have to be any inflation. Period. It is simply a way for central banks to make infinite profits. Nobody sees this. Not even @piezoe
Forbes must be senile. This is insanity.The ‘real cure’ for inflation has gone ignored, Steve Forbes says
Published Mon, Sep 26 2022 Su-Lin Tan@SuLin_Tan
https://www.cnbc.com/2022/09/26/the-real-cure-for-inflation-has-gone-ignored-forbes-says.html
- In focusing on raising interest rates to cool inflation, central banks and governments have overlooked the importance of maintaining stable currencies, said Steve Forbes, chair of Forbes Media.
- “The real cure is to stabilize the currency. You don’t have to make people poor to conquer inflation,” he said.
- The British pound briefly fell 4% to an all-time low of $1.0382 on Monday in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.
The British pound plunged to a record low on Monday morning in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.
In focusing on raising interest rates to cool inflation, central banks and governments have overlooked the importance of maintaining stable currencies, said Steve Forbes, chair of Forbes Media.
The British pound briefly fell 4% to an all-time low of $1.0382 on Monday in Asia, following last week’s announcement by the new U.K. government that it would implement tax cuts and investment incentives to boost growth.
Currencies are weakening against the U.S. dollar as interest rates in the United States continue to rise. Both the Chinese yuan and Japanese yen also fell heavily as the two economies maintain more accommodative monetary policies than the United States.
“No central banker today — hardly any — talks about stable currencies. It’s about depressing the economy to fight inflation,” Forbes said at the Forbes Global CEO Conference in Singapore on Monday.
He said many economists and policymakers have stuck to a standard “dogma” or mindset of targeting inflation by hiking interest rates and failed to look beyond that, such as by taking steps to shore up currencies.
‘The real cure’
Forbes cited favorably an example from the 1980s: After then Fed chair Paul Volcker reined in inflation with a dramatic interest rate hike of over 20%, U.S. President Ronald Reagan stabilized the economy and increased production by cutting taxes and introducing deregulation.
The Reagan administration also coordinated global efforts to sell dollars and buy up other currencies.
“Today, unfortunately, not only is the Biden administration putting up obstacles to deal with supply-side problems, but also the Federal Reserve and other central banks think you have to depress the economy to bring inflation,” he said disputing the idea that a recession is the only solution to combating inflation.
“They do it by artificially raising interest rates. So they have fewer people employed ... that is not the real cure.”
“The real cure is to stabilize the currency. You don’t have to make people poor to conquer inflation.”
Currency imbalances can create problems for economies. A higher U.S. dollar means more expensive exports, while weaker currencies could mean problems like lower foreign exchange reserves.
Forbes suggested using gold to stabilize currencies — for example, tying the U.S. dollar to gold so the dollar has a fixed value.
“Gold holds its intrinsic value better than anything else on earth … gold is not perfect as a stable value but it is better than anything we have found in over 4000 years,” he said.
“With unstable currencies you get less productive long-term investments, which is key to economic growth.”
Forbes said that after the Bretton Woods gold standard was introduced in the 1940s — under which the U.S. dollar was fixed to gold and other currencies were fixed to the dollar — economic growth rates were a lot higher.
However, the Bretton Woods system collapsed in the 1970s.
Separately, HSBC’s global chief economist Janet Henry said at a panel at the same conference that she would not be surprised if the sterling continued to fall below the low of $1.0382 on Monday, but she did not expect it to stay at those levels.
“I don’t think there will be currency intervention on the sterling … but the onus is now on the central bank to do more to tighten policies to stabilize the situation,” Henry said.
“I think unless we get severe financial distress they [bank] will wait until the next meeting to show decisive action to raise rates aggressively in the next couple of meetings.”
Fed reminds me of a firefighter who creates a fire in order to stay employed.
After the fire engines have arrived at the blazing scene, the firefighter makes out he's doing at great service to the community, even joining in discussion meetings later on how to prevent fires.
Has the RBA kept food and housing inflation stable or you all dealing with it too?
I've been running a thread Australia’s property boom making the nation poorer which is up to page 51 atm, all about housing prices being out of control.
Food prices began creeping up about a year ago, mainly as a result of labour shortages due to Covid and possibly to a part where farm workers, backpackers etc cant afford to pay the crazy Australian rents.
Food prices began creeping up about a year ago, mainly as a result of labour shortages due to Covid and possibly to a part where farm workers, backpackers etc cant afford to pay the crazy Australian rents.
Certainly there are times when this would be an appropriate observation.
What I was referring to in my comment regarding the article about Forbes was the reporters remark: "Forbes suggested using gold to stabilize currencies — for example, tying the U.S. dollar to gold so the dollar has a fixed value."
This might just be Forbes being misinterpreted by the reporter. I hope so. No sane person would advocate going back to the gold standard, because it's impossible. And why would anyone want to go back to it unless they were truly insane?
The gold standard wasn't a good idea when it was briefly fully implemented from 1957-71. Keynes warned in 1944 that it could not succeed, ad he was right! He also was responsible for convincing Roosevelt to get rid of it during the Great Depression, which he did by subterfuge against a protesting Central Bank. They hated Roosevelt for this. (The Central Bank was controlled by private banks in those days.) The gold standard hung like an albatross around the neck of the U.S. economy. Once rid of it, Roosevelt's new deal programs could begin to heal our broken economy. The gold standard will never return, and thank god for that!
Mick, do you think President Trump’s constant threats to Powell of Impeachment that if he did not go to 0% caused any of this mess? Powell caved in 2019
Paul Volcker endured the Reagan’s brutal attacks and stood his ground. Than again voters in the 1980s were more long suffering and less radicalized.
Trump directly attacks Fed Chairman Powell, saying 'Obama had zero' interest rates
https://www.cnbc.com/2018/10/10/trump-says-the-federal-reserve-has-gone-crazy.html
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Trump attacks Fed Chair Powell's 'horrendous lack of vision,' calls for huge rate cut
"Democrats are trying to 'will' the Economy to be bad for purposes of the 2020 Election. Very Selfish!" President Trump tweeted.
https://www.nbcnews.com/news/amp/ncna1043931
Yep, leading politicians have a huge influence on what the Fed might do.
Political parties are voted in by consituents, therefore the Fed thinks that what politicians want is what the majority of people want.
To run contrary to what the ruling party leader wants, is inviting disaster to your job and the Fed is like all employees, wants to save its ass.
Unfortunately its called appeasment and we are but human, wanting to be liked even though we may disagree with our own decision.
I'm sure for example, the Russian army as a whole do not like or agree with slaughtering civilians, nevertheless they go ahead and do it to appease those higher up the chain.
But Trump is nearly clueless in everything, gawd knows how the American public were so easily conned to vote in a TV personality actor. Such is life.
Political parties are voted in by consituents, therefore the Fed thinks that what politicians want is what the majority of people want.
To run contrary to what the ruling party leader wants, is inviting disaster to your job and the Fed is like all employees, wants to save its ass.
Unfortunately its called appeasment and we are but human, wanting to be liked even though we may disagree with our own decision.
I'm sure for example, the Russian army as a whole do not like or agree with slaughtering civilians, nevertheless they go ahead and do it to appease those higher up the chain.
But Trump is nearly clueless in everything, gawd knows how the American public were so easily conned to vote in a TV personality actor. Such is life.