“We believe that Gold as an asset hedge has been replaced by crypto,as it cannot be minipulated by the central banks”–Paul Ebeling
Wednesday, Fed Chairman Powell defended the near Zero interest rate policies he has pursued since the VirusCasedemic hammered the economy more than 18 months ago. And he acknowledged inflation has stayed higher for longer than he expected.
Meaning inflation is here to stay
At a panel sponsored by the ECB, Mr. Powell was asked if the Fed is overdoing it with its policy of cutting its short-term interest rate to nearly Zero and purchasing $120-B/month in bonds to lower longer-term rates.
“The historical record is thick with examples of underdoing it,” Chairman Powell responded. “And pretty much in every cycle, we just tend to underestimate the damage and underestimate the need for a response. I think we’ve avoided that this time.”
Criticism of the Fed’s policies has grown in recent months as inflation has jumped to 30yr highs in this Biden era.
The economy’s Key challenge shifted from weak demand as a result of widespread layoffs, which the Fed can help counter with lower interest rates, to supply shortages, which the Fed can do nothing about.
When consumers began ramping up spending this Spring and Summer, fueled by stimulus checks, many businesses were caught off guard, and shortages of cars, furniture and electronics quickly materialized. That pushed inflation to 4.2% in July from a yr earlier, according to the Fed’s preferred measure.
Chairman Powell initially called such inflation “transitory” and said it would fade as the economy reopened further and the supply chain bottlenecks were worked out, that description has faded.
Lots of supply bottlenecks remain, with ships backed up at all major West Coast ports. And shortages of chemicals are now pushing up prices for a range of goods from plastics to paint.
Chairman Powell said it is “frustrating to see the bottlenecks and supply chain problems not getting better, in fact, at the margin, apparently getting a little bit worse.”
“We see that continuing into next year probably and holding inflation up longer than we had thought,” he concluded.
Still, some Fed officials forecast that inflation will decline over the next 12 months, to 2.2% by the end of Y 2022.
- Governments and central banks around the world are watching crypto’s advance warily because it has the potential to upend the existing financial system and undermine their role in it. In its current form. Bitcoin, Ether and GBITS presents this Key challenge to government authority: it cannot be regulated.
- Thus, in this new setup, the role of governments in managing and regulating economic policy through intermediaries will become superfluous.
Those of us who advocate crypto charge the Fed with creating money out of thin air i.e., the currency is not backed by tangible assets.
Have a prosperous day, Keep the Faith!