Economic Policies: Likely To Turn From Soft Landing Engineered By Fed Into Hard Crash Created By Ballooning Debt, Interest

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A clip from the 1990 movie Home Alone where the lead character purchases groceries, household goods, and toys recently went viral because he paid a total of $19.83 whereas today the same purchase would cost over three times as much. Ironically, while this evidence of the Federal Reserve’s failure to maintain the dollar’s value was going viral, stocks rose because investors believed the Fed had successfully engineered a “soft landing” by bringing down price inflation without causing a recession and would soon begin reducing interest rates.

Then, stocks fell at the beginning of the year when the release of the notes of the Federal Reserve Board’s last meeting suggested the Fed would not hurry rate cuts. The likelihood of a delay in cutting rates was further increased by a “positive” December Jobs report.

The jobs report did show unemployment remaining low and wages slightly increasing, but the news was not all positive. One of the report’s most troubling items is that a top source of increased wages is government. An increase in the salaries of government employees also increases government debt, which will have to be paid for by taxes. Since tax increases are unpopular, the government relies on the Federal Reserve to do the dirty work by purchasing federal debt instruments and thus creating more inflation. This inflation tax is the worst of all taxes because it is regressive and hidden.

If the Fed allowed interest rates to increase to anywhere near what they would likely be in a free market, interest rate payments on the federal debt would rise to a level causing a financial crisis.

Even though the federal government will soon spend more on interest on the federal debt than on the Pentagon and the military-industrial complex, few in DC are serious about cutting spending. Federal debt increased by one trillion dollars from mid-September to the beginning of the new year. It is expected to increase by around another trillion dollars by the end of March! To put this in perspective, consider that the federal debt did not reach a trillion dollars until 1981 — almost two hundred years after the Constitution was ratified.

Continuing increases in federal debt and Federal Reserve created inflation will lead to economic crisis caused by a rejection of the dollar’s world reserve currency status.

There is already resentment over the US government’s use of the dollar’s reserve status to support US sanctions. This is why Russia and Iran recently signed a deal to trade in their own currencies rather than in dollars, and Russia is no longer accepting dollars for its oil.

President Biden has kept his promise to refrain from criticizing the Fed’s conduct of monetary policy. In contrast, his predecessor regularly took to Twitter to lambaste the central bank. This means the Fed will likely try to help President Biden by trying to keep interest rates low enough to not increase unemployment, yet high enough to not increase price inflation.

While Donald Trump is more likely than Joe Biden to challenge the deep state and neoconservative foreign policy, the truth is neither Biden nor Trump will seek to reduce spending. Unless a critical mass of Americans demand an end to the welfare-warfare state and the fiat money system, the soft landing sought by the Fed and the politicians will turn into a hard crash.

Banner Image: Bulls and bears. Image Credit – geralt


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Ron Paul

Ronald Ernest Paul (born August 20, 1935) is an American author, physician, and retired politician who served as the U.S. Representative for Texas's 22nd congressional district from 1976 to 1977 and again from 1979 to 1985, and then for Texas's 14th congressional district from 1997 to 2013. On three occasions, he sought the presidency of the United States: as the Libertarian Party nominee in 1988 and as a candidate for the Republican Party in 2008 and 2012. A self-described constitutionalist, Paul is a critic of the federal government's fiscal policies, especially the existence of the Federal Reserve and the tax policy, as well as the military–industrial complex, the war on drugs, and the war on terror. He has also been a vocal critic of mass surveillance policies such as the USA PATRIOT Act and the NSA surveillance programs. He was the first chairman of the conservative PAC Citizens for a Sound Economy, a free-market group focused on limited government,[3] and has been characterized as the "intellectual godfather" of the Tea Party movement, a fiscally conservative political movement that is largely against most matters of interventionism.[4][5] Paul served as a flight surgeon in the U.S. Air Force from 1963 to 1968, and worked as an obstetrician-gynecologist from the 1960s to the 1980s.[6] He became the first Representative in history to serve concurrently with a child in the Senate when his son, Rand Paul, was elected to the U.S. Senate from Kentucky in 2010.[7] Paul is a Senior Fellow of the Mises Institute,[8] and has published a number of books and promoted the ideas of economists of the Austrian School such as Murray Rothbard, Friedrich Hayek, and Ludwig von Mises during his political campaigns. After the popularity and grassroots enthusiasm of his 2008 presidential bid, Paul announced in July 2011 that he would forgo seeking another term in Congress in order to focus on his 2012 bid for the presidency.[9] Finishing in the top four with delegates in both races (while winning four states in the 2012 primaries), he refused to endorse the Republican nominations of John McCain and Mitt Romney during their respective 2008 and 2012 campaigns, and on May 14, 2012, Paul announced that he would not be competing in any other presidential primaries but that he would still compete for delegates in states where the primary elections had already been held.[10] At both the 2008 and 2012 Republican National Conventions, Paul received the second-highest number of delegates behind only McCain and Romney respectively. In January 2013, Paul retired from Congress but still remains active on college campuses, giving speeches promoting his libertarian vision.[11][12] He also continues to provide political commentary through The Ron Paul Liberty Report, a web show he co-hosts on YouTube. Paul received one electoral vote from a Texas faithless elector in the 2016 presidential election, making him the oldest person to receive an Electoral College vote, as well as the second registered Libertarian presidential candidate in history to receive an electoral vote, after John Hospers in 1972.

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