The Fed

The FedThe Fed’s core policies of 2% inflation and 0% interest rates are kicking the economic stuffings out of Flyover America. They are based on the specious academic theory that financial gambling fuels economic growth and that all economic classes prosper from inflation and march in lockstep together as prices and wages ascend on the Fed’s appointed path.

Au contraire! Those propositions are the most economically destructive and wantonly unjust notions ever embraced by an agency of the state. They clobber the middle- and lower-end of the income ladder while showering the top tier of financial asset owners with stupendous windfalls of unearned gain.

So the nation’s rogue central bank is essentially a reverse Robin Hood on steroids. If Donald Trump wants to hit the ball out of the park next Monday evening, therefore, he needs to quickly skip over his dog-eared income tax cut plan
and put the wood good and hard to the Fed, Janet Yellen, and our unelected financial rulers.

They are killing wages, off-shoring jobs, trashing savers, subsidizing the banks, gifting Wall Street speculators with endless financial bubbles and rigging the markets to insure that the Democrats win.

In response to that line of attack, Hillary will harrumph and sputter about the sacred “independence” of the Fed; claim that by slashing interest rates the Fed “saved” the American economy; and scold that such reckless talk
will unsettle markets.

But none of that will even register with the hurting voters of Flyover America. They know the Fed serves Wall Street and the moneyed classes and that rigged financial markets have done nothing to arrest their shrinking living
standards and diminishing job prospects.

Unfortunately, what will register loudly with so-called Reagan democrats and other working people is the chart below. If Trump keeps listening to his semi-geriatric economic advisors, who are stuck in a 1980s time warp, he will
spend the night answering Hillary’s irrefutable accusation that the Trump tax plan amounts to a 1.3% cut for the middle class and 16% cut for the top one percent.
No, we are not channeling Paul Krugman or Professor Piketty. In principle, lower income taxes are better than higher taxes and deliberate redistributionism by the state is always doubly bad. But the villain of the piece in 2016 is
not the IRS tables; its the central bank’s printing press. So there is no point in taking a political hit to solve the wrong problem.

It was a totally different world in the early 1980s. The Gipper’s promise to slash incomes taxes by 30% across-the board resonated with “Reagan democrats” because double-digit inflation was causing a rip-roaring bracket creep.

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  • PT

    I have never understood the rationale of providing consumers the same purchasing powers whether they pay cash or buy on credit. In other words why should zero interest rates be provided for any purchases involving credit to the detriment of those who pay cash unless the Fed wants to encourage a debtor nation mentality and discourage any interest baring savings. We know the answer-the federal government in its quest to buy democrat votes must finance deficit spending by keeping its debt service as low as possible.

    The “free trade” argument that you hear from traditional economists is antiquated if you wish to retain any domestic manufacturing. Labor unions and liberal “living wage” policies prohibit the lowering of cost of goods and make anything made in the U.S. non-competitive in world markets by definition. Capitalism should be unencumbered as far as supply and demand and the burden of government regulations prohibits prices, interest rates, and the free flow of goods and services from seeking their proper market levels. The socialist democrats are in charge of the economy and the result is no economic growth, no jobs, and no hope for conditions to improve. Either more years of Obama/Clinton policies will lead to world recession and massive starvations. As Trump so often says “Sad, very sad”.