Welcome to The Intolerant Lefty Blog! I started this blog of commentary and analysis on some of the most pressing issues of our time that just happen to effect me. From politics to mental health, addiction to psychedelics, I provide my perspective, backed up by facts.
Sunday, October 16, 2022
Jerome Powell is purposely tanking our economy
Jerome Powell, the head of the Federal Reserve, is making all the wrong moves to try and rein in inflation on the backs of everyday Americans by raising interest rates. I wrote about this a month ago, but now it's very clear that Powell is doing an awful job. A month ago, I said how his actions would drive us into a recession and it is. Now the question is how bad the recession will be.
Why Biden continued with Jerome Powell who I believe was appointed by Donald Trump is beyond me. When we see all the backroom underhanded dealings that went on with Trump's administration can we really trust Powell to do the right thing? Is he purposely tanking our economy to try and regain republican control? We cannot fall for it! The Oil Industry, Putin, The Saudis, and Jamie Diamond have all made moves to make things worse, and it is obvious to anyone that has not drank the authoritarian Kool-Aid as to why.
In order to understand how we got here; we need to go back to early 2018. At that time, the U.S. economy was humming along nicely. The stock market was near all-time highs, unemployment was at a 17-year low of 4.1%, and wages were finally starting to rise after years of stagnation. Inflation was still relatively low, but it was starting to tick up gradually as the economy strengthened.
In response to these conditions, the Fed began gradually raising interest rates from historically low levels in order to prevent inflation from rising too quickly. The Fed raised rates four times between June 2018 and December 2018, from a range of 1.75% to 2.5%. Then, in December 2018, something happened that caught everyone off guard: President Donald Trump appointed Jerome Powell as the new head of the Federal Reserve.
Powell had only been a member of the Fed for less than two years at that point, and he had no prior experience as a central banker. Nevertheless, Trump felt that Powell would be more "accommodating" than his predecessor, Janet Yellen, when it came to interest rates and other economic policy matters. Little did we know at the time just how right Trump would turn out to be about Powell's accommodative stance.
The Fed Changes Course
Under Powell's leadership, the Fed abruptly changed course in early 2019 and stopped raising rates altogether. Then, in July 2019, Powell signaled that the Fed might start cutting rates if economic conditions warranted it—which they did not, in my opinion. The stock market responded immediately by falling sharply over concerns that a potential recession might be on the horizon.
The Fed ultimately cut rates three times between July 2019 and March 2020 in an effort to prop up the economy—even though there was no evidence that a recession was actually coming. These rate cuts had two major effects: first, they caused asset prices (e.g., stocks) to surge higher as investors poured money into riskier assets in search of higher returns; and second, they put downward pressure on interest rates across the entire yield curve (the difference between short-term and long-term rates). This had the effect of making borrowing cheaper for businesses and consumers alike—which gave everyone more incentive to borrow money and take on more debt than ever before.
The Perfect Storm Forms
Fast-forward to today: we are now dealing with the consequences of those three unnecessary rate cuts by Jerome Powell—and they are not pretty. As I warned back in December 2018 when Trump appointed Powell as head of the Fed, his accommodative monetary policy stance has helped create a perfect storm for inflationary pressures: asset prices are soaring while bond yields are near record lows (meaning that there is less incentive for people to save money), and borrowing costs are at historic lows (meaning that there is more incentive for people to take on debt). This perfect storm has resulted in an inflationary spiral that is starting to pick up speed—and it shows no signs of slowing down any time soon.
Jerome Powell is clearly not fit for his position as head of the Federal Reserve. His actions have driven us into a recession, and it remains to be seen how bad this recession will be. I believe that he was appointed by Donald Trump as part of a backroom deal, and we cannot trust him to do what is best for the American people. The only way to protect ourselves from further economic harm is to vote blue in the upcoming midterm elections. Our only hope is to put the whole nightmare of Donald Trump behind us, and we do that by sending an overwhelming message to republicans that we will not tolerate them flirting with Fascism & Authoritarianism ideologies. Yes, this started out as a rant about Jerome Powell, but remember he is just a tool Trumpism put in place. I understand President Biden’s desire for bipartisanship, but reappointing Powell was a mistake and may go down as his biggest, otherwise just keep moving forward Joe! Because it is clear the other side does not share that desire, so we must drive this current republican party which should just be renamed the Trump Party into the dustbin of history where it belongs, right next to the confederacy.