Federal Reserve Chairman Jerome Powell and his Federal Reserve colleagues are in a baffling split screen sharply contrasting with the White House. Team Biden is filled with recession deniers, conjuring up the rosy economic portrait President Joe Biden and Democrats are trying to paint heading into November.
Meanwhile, Team Fed continues to double down on the harsh stance Powell took during Friday’s remarks at the Federal Reserve’s annual Jackson Hole summit. Stocks nosedived on Friday after markets responded to Powell’s hawkish tone.
Of course, Powell’s harshness had limits: there was no apology or acknowledgement of failure after last year at the same conference he predicted that price spikes were likely to be temporary. Obviously, they were not, and American families are suffering record, crippling inflation as the Fed scrambles to play catchup.
“Restoring price stability will likely require maintaining a restrictive policy stance for some time,” Powell said. What a contrast compared to the no-restrictions, wasteful spending out of Congress and the White House, which fuels inflation but that Powell totally ignored.
Powell announced he’s going to raise rates until inflation starts to come down. But through the first two quarters of 2022, we’re already in a recession and it could become a deep recession with such accelerating rate hikes.
Unlike other Fed chairs, Powell has been reluctant to comment on government spending, tax policy, energy production or climate change. But the Feds’ bond buying has already merged monetary and fiscal policy, leaving the Fed mixed up.
“We estimate that at the end of May, the Federal Reserve had an unrecognized mark-to-market loss of about $540 billion on its $8.8 trillion portfolio of Treasury bonds and mortgage securities,” American Enterprise Institute scholars Paul H. Kupiec and Alex J. Pollock wrote in late June. “This loss, which will only get larger as interest rates increase, is more than 13 times the Federal Reserve System’s consolidated capital of $41 billion … according to the Federal Reserve Act, Fed losses should impact its shareholders, who are the commercial bank members of the 12 district Federal Reserve banks.”
Given this confusing split screen — a White House in recession denial and a Federal Reserve refusing to advocate for fiscal reforms that would tame inflation — it’s no wonder that an overwhelming 74% of Americans say the United States is going in the wrong direction, according to a new NBC News poll conducted earlier this month. The poll also found that most Americans say Biden is handling the economy poorly.
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Carrie Sheffield is a senior policy analyst at Independent Women’s Voice.
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