The Rate Hike

More Halfway Measures from Powell’s Fed; Nothing Gets Fixed!

The Fed says it is moving expeditiously to bring inflation down.  

You wouldn’t know it based on its latest move.  In fact, both gold and silver were so little impressed with the latest from the Fed that both jumped higher.

The Federal Reserve raised interest rates by three-quarters of a percentage point for the second straight meeting on Wednesday (7/27) in an attempt to get inflation under control.  

But inflation is roaring ahead anyway.  And the Fed’s half-hearted move is more politics than substance

After all, the inflation rate is 9.1 percent, while wholesale price inflation is over 11 percent.  

The last time we had inflation this high, the Fed had to raise interest rates above the inflation rate to get things under control.  

The Fed’s new move doesn’t even come close to doing that.  It has raised its policy rate, the Fed funds rate, from 2.25 – 2.50 percent.  The Fed would need to raise rates another 6.5 percent to implement the successful inflation-fighting strategy from 40 years ago.  

Meanwhile, big companies like Coke and Mcdonald’s, as well as others, are raising prices.  

Powell says the Fed will need to be “nimble” in its policy changes.  That means it has no clear idea where inflation comes from and what to do about it.  It means the Fed is simply going to be reactive to the economic numbers as they come in.  But the numbers once gathered are already history.  So, the Fed is constantly behind the curve of real events, always playing catch-up.  That explains why it is always surprised by real conditions, for example, its discovery that inflation did not prove to be transitory.  

Meanwhile, the Fed is hoping desperately that conditions normalize all by themselves.  It hopes that gas prices will fall, that harvests will be abundant, and that the supply chains will work themselves out.  Then the Fed can escape blame for its promiscuous money printing.  Its unhinged creation of $8 trillion dollars since the last market crack-up will be thought to have nothing to do with the dollar’s failing.

But nimble or no, actions have consequences.  And that includes legalized counterfeiting of dollars.  By printing and spending all that money, the Fed has enabled powerful claims on the future.  It spent money it didn’t really have.  That bill will be paid.

We hope you don’t find yourself victimized by the dollar’s coming deterioration.  Speak with a Republic Monetary Exchange gold and silver specialist today.