Does the Fed’s Anti-Inflation Policy Make Any Sense?

It is clear to everyone by now that the Federal Reserve is treating a rise in prices from supply shocks and disruptions from the Covid lockdowns and sanctions against Russia, Iran, and other countries as if it were a monetary inflation. It is true that too much money is chasing too few goods and services, but the cause is supply shortages and not excess consumer demand.

This fact is obvious, but it is not acknowledged. We know that the lockdowns and sanctions stopped production, caused transportation problems, caused energy shortages, caused business failures, and disrupted supply chains.

We also know that excess consumer demand in the US did not cause double digit inflation in Europe and some food prices in England to double. The inflation in the UK and Europe was caused by the Biden regime’s supply-disrupting sanctions and by their own Covid lockdowns.

A correct anti-inflation policy would be to remove the sanctions that restrict supply and the free movement of goods and services. The Federal Reserve’s higher interest rates though simply suppress economic activity, thereby reducing supply, and results in higher prices.

Economists and financial journalists clearly learned nothing from the Supply-Side Revolution. They still interpret the economy in the one-dimensional Demand-Side way in which inflation is caused by too much consumer income and results in excess demand that has to be quashed with high interest rates.

There is really no excuse for the Federal Reserve’s policy. Not even people appointed for political, not competence, reasons can be so stupid. So what is really going on?

US Treasury Secretary Janet Yellen told us on May 19 when she told a meeting of chief executives of US banks that more bank mergers are likely necessary. Simultaneously Yellen reaffirmed to the bank executives that the banking system was strong and sound…. But if the banking system is strong and sound, why are more bank mergers necessary?

The main effect, and perhaps the purpose, of the Federal Reserve’s rise in interest rates, has been to drive large numbers of US banks into insolvency.

Banks are not required to mark-to-market, which means that banks can keep their investments in financial instruments on their balance sheets at face value. Therefore, their insolvency is technical.

It was clearly deceptive for Treasury Secretary Yellen to say the banking system is sound and strong.

I have become convinced that the purpose of the Federal Reserve’s rise in interest rates is unrelated to inflation. Inflation is the excuse. The agenda is to further monopolize the financial system by forcing the remainder of the regional banks into the hands of the five “too-big-to-fail” national banks. A concentrated banking system is easier to control and makes it easier to impose “digital currency” that removes financial independence from the American people.

And that is the TRUTH

Original post by Ziad K Abdelnour