Alternative Visions - The Fed, Inflation, and the End of Fiscal Stimulus

Dr. Rasmus dissects the Federal Reserve Bank’s decision this past week announcing 3 interest rate hikes next year in 2022 and a faster retreat from its Covid era $120 billion per month injection of free money to bankers and investors. In a ‘Monetary Policy 101’ presentation, Rasmus explains how the Fed provides that free money (called ‘liquidity’ in economist parlance) and consequences of it for the real economy and financial market bubbles. Fed traditional bond buying, QE buying, & what’s called ‘Reverse Repos’ are described as channels of liquidity injections by the central bank. Can monetary policy address supply side inflation? Powell’s Fed is compared to Volcker’s in 1980-81. Does the Fed really control interest rates? Why financial markets surged after Powell’s announcement. Rasmus briefly comments on the now dead fiscal policy of the Biden administration. And predicts a slowing US economy in 2022. A concluding comment is offered on why US government economic statistics are distorted by seasonality adjustment that’s broken in the era of Covid—and why current positive growth numbers for manufacturing and GDP are really negative.