The inflationary tax that working families face under Biden’s presidency has many root causes. But one of the most important concerns an individual that most Americans have not heard of: Jerome Powell, chairman of the Federal Reserve Bank.
While inflation has hit a 30-year high of 6.2%, more than three times the Fed’s 2% inflation target, the central bank continues to print more money and plans to continue to do this for several more months. Powell’s carefree “What, am I worried?” The approach to “fighting” inflation has drawn growing criticism from surprising quarters, but Biden could re-appoint Powell for a second term as Fed chairman when his current term expires in February.
With progressive groups and lawmakers like Senator Elizabeth Warren, D-Massachusetts, pushing Biden to dump Powell, some Republican senators appear inclined to back his re-appointment, on the grounds that any replacement Biden proposed would have a much more radical agenda on issues. as banking regulation. But conservatives who vote to reconfirm Powell run the risk of âowningâ the Fed’s easy money policies and the inflationary spikes that have accompanied them.
Print money …
Nobel Prize-winning economist Milton Friedman called inflation “always and everywhere a monetary phenomenon.” With inflation occurring when too much money drives out too much goods, any study of the current inflation spike must begin with the role of the Federal Reserve. Even now, about 20 months after COVID first caused lockdowns and major shocks to the US economy, the Fed has kept its foot on the monetary accelerator, printing money through ‘quantitative easing’ to stimulate economic growth.
Since March 2020, the Fed has bought $ 120 billion per month in Treasury bonds and mortgage-backed securities. As illustrated in a PBS Frontline special last summer, the Fed continued to drive its metaphorical car at 100 miles an hour, long after the emergency shock to the economy caused by lockdowns. last spring has passed. But in doing so, the Fed inflated the prices of real estate assets, stocks and other financial instruments, causing dangerous bubbles that could eventually âburstâ – with unpleasant economic consequences.
This month, the Fed finally announced that it would take its foot off the monetary accelerator, but only slightly. It will cut its purchases by $ 15 billion per month, printing “only” $ 105 billion in cash in November, $ 90 billion in December, and so on. At this rate, however, the Fed will inject another $ 420 billion into the economy by the end of its purchases in late May, again, as inflation continues to hit 30-year highs.
It’s no wonder, then, that Senator Joe Manchin, D-West Virginia, in a document he signed with Majority Leader Chuck Schumer, D-New York, in July, agreed to proceed with a resolution. budget paving the way for the multi-spending bill of trillion dollars only if the “Federal Reserve ends quantitative easing.” Unfortunately, Manchin did not abide by his terms, because if he had, the Fed would have avoided injecting an additional $ 780 billion into the economy from August 1 until the Fed’s planned end of its program of d printing money next May.
… and monetization of the federal debt
And make no mistake about it: The Fed’s actions in printing money don’t just accelerate inflation, they also help ease the passage of the Democrats’ heavy spending agenda. In a speech last October, Powell made clear his intentions for more ‘stimulus’: âThe recovery will be stronger and go faster if monetary and fiscal policy continue to work side by side to support the economy. until she’s clearly out of the woods. “
In other words: Democrats should continue with their big spending program, and Powell and the Fed will continue to buy the Treasuries that fund it. Unsurprisingly, House Speaker Nancy Pelosi followed Powell’s October 2020 speech by calling for more “stimulus” measures.
Some may have forgotten it, but the $ 1.9 trillion package Democrats passed last March still has $ 709.8 billion to spend in the current fiscal year (which ends 30 next September) and beyond. Plus, the multibillion-dollar spending bill Democrats want to pass in Congress this year will likely increase the deficit – and therefore inflation – in its early years, though we haven’t yet. saw a score from the Congressional Budget Office to know the precise result. amount.
Had the Federal Reserve already halted its quantitative easing programs and started raising interest rates, Democrats probably wouldn’t have spent this fall trying to rake in trillions of dollars in new entitlement spending. Without the Fed buying up a large chunk of the available treasury bills, bond markets might have taken a very dim view of the left’s plans to create a European socialist state, and the bill would have may have collapsed before taking off.
“Shut up Jay Powell!” “
With Powell and the Federal Reserve fiddling with inflation as inflation burns white, more and more analysts have called for firmer action from the country’s central bank. Influential economic analyst Mohamed El-Arian said on Monday that “the Fed is losing credibility” by not ending its banknote printing operations sooner. Even Jason Furman, who chaired the White House Council of Economic Advisers during Barack Obama’s second term, called for faster action by the Fed to fight inflation in a Wall Street Journal op-ed:
The oversized and ill-conceived $ 2.7 trillion fiscal stimulus passed in December and March is at least partly to blame for [higher inflation in the U.S. than in Europe]â¦.The [Federal Reserve] should express a more realistic understanding of inflation and strengthen monetary policy by reducing asset purchases more quickly. The Fed should set the default expectation that federal funds [interest] will be on an upward trajectory from the first half of 2022.
With pundits like these throwing much of the blame for inflation at the foot of a nonchalant Federal Reserve, Senate Republicans shouldn’t confuse their messages on price hikes by voting for the creator of this strategy. from the Fed. Instead, they should advocate for Powell’s replacement as president, hopefully next spring, but no later than after the 2024 presidential election.