The goal of the latest interest rate hike from the Federal Reserve? To avoid a deep recession “by acting with resolve now,” according to Fed Chairman Jerome Powell. But if history is any guide, this is a case of too little, too late.
A century ago, the Federal Reserve created billions of dollars for the government to spend on World War I, then led us into a recession in 1920 with steep interest rate hikes in its attempt to cool off the inflation that followed the war. This was the Fed’s first test of its ability to manipulate the economy at the expense of the average American, and it passed with flying colors.
Fast-forward almost exactly 100 years, and little has changed. Powell created trillions of dollars for the government to spend over the last two years, and now there is too much liquidity in the market, which has driven up prices and gotten the economy addicted to cheap credit.
His solution: stop the pecuniary printing presses, which will cause a recession in the short run. So, after transferring wealth from the people to the government via inflation in the boom, the Fed chairman is causing a bust in his attempt to bring prices back down. Look out, common man: Powell gets you coming and going.
To illustrate how laughably behind the curve Powell is on inflation, interest rates were already in double-digits when inflation was last this high, 40 years ago. Today, the key Fed interest rate is less than 3.25 percent. The time to start 100-basis-point hikes was long ago.