I Can’t Understand Why Unless Or Unless

It didn’t get the “ink” that a lot of other stories did (including one that never happened) but I maintain that the biggest political story of the week just passed was the Fed raising interest rates again. This one almost certainly will have massive negative repercussions in the future. I read and heard all the justifications for the Fed’s move but I still can’t understand why they did it unless one of two -and neither are good – circumstances exist.

We (and it was apparently not just America) appear to have narrowly escaped a banking crisis much of which was attributable in part to high interest rates that rose somewhat rapidly. So, what does the Fed do? It raises rates. Am I the only one who is confused?

In all those maneuvers the Fed solidified the myth (or is it fact) that the biggest banks are de facto to big to fail. Quick (and very incomplete) primer: The very largest banks are subject to stricter regulations which, among other things, demand greater “liquidity”. To maintain that “liquidity” they will have to tighten lending thereby making less money available. The medium size banks that survived hopefully have learned a lesson from recent events and will also be tightening the “lending belt”. The net result will be that less money will be available to borrowers and the money that is available will cost more.

The above condition makes the landscape ripe for recession. I feel that Jerome Powell and the Fed will not be content until they plunge the American (and soon to follow, if not precede) the global economy into recession. A major feature of that recession will be higher unemployment. Inflation – and make no mistake its pace is significantly slowing – is a problem but most inflation while employed is tolerable; inflation coupled with unemployment is often insurmountable for many.

Could it be that Powell and company are simply incompetent? That seems far fetched by then again did anyone ever check the arithmetic of then Republican policy guru Paul Ryan?

Is it just my left of center mindset or are he and his mates part of some vast right wing Republican friendly conspiracy? One of the few things that binds today’s GOP together is the desire to make Joe Biden look bad and what better way to achieve that goal than to sabotage the economy? If we enter a recession the vast majority of the electorate (and I believe people vote largely with their “pocketbook”) will blame Biden because he is the current president.

I am not an economist. In fact, my degree (while somewhat related) isn’t in economics. I just took a few economics courses in college and happen to follow it a bit to this day. What I am is an American capable of critical thinking and I don’t understand why the Fed made this move unless there was a hidden agenda or it is a case of simple incompetence neither of which are either good or acceptable.

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