The Fed Playbook is Broken

On today’s show we are dissecting the latest rate 0.5% federal funds rate increase announced Wednesday by Jerome Powell, chair of the Federal Reserve.

We have become conditioned to believe that the Fed, acting as the central bank for the world’s reserve currency holds disproportionate power in the monetary system, and indeed in the global financial system.

Printing of money is inflationary, and the banks themselves print a lot of money. In many ways, the private sector prints more money than the Fed. That over-supply of money is actually the cause of inflation. So the question is whether interest rates and reducing the Fed’s balance sheet will be enough to reduce inflation. Price stability is the Fed’s objective.

The fact is, the US government is still spending well above its means. In fact the deficit is $250B a month.

As interest rates increase, so too does the deficit, despite all the rhetoric about wanting to stamp out inflation,