Peter Reagan
\nBirch Gold Group<\/p>\n
The general thinking over the last several decades is that one of the Fed\u2019s primary jobs is to keep the economy running along like a well-oiled machine while keeping inflation from getting out of control (which, if you think about it, is a subtle nod to one of the biggest problems with a fiat money supply, but I digress\u2026).<\/p>\n How does the Fed usually work its \u201cmagic\u201d on the economy? Typically by adjusting\u00a0interest rates<\/a>\u00a0\u2013\u00a0 in a nutshell, the Fed raises or lowers the cost of credit. Lower rates make borrowing and spending cheap, while higher interest rates discourage borrowing and encourage saving instead.<\/p>\n If the economy is not growing at a rate that the Fed likes, they\u2019ll tend to\u00a0lower\u00a0<\/em>interest rates. More borrowing, less saving, more spending \u2013 for households and businesses alike. Too much of this leads to an \u201coverheating\u201d economy, because more borrowing and spending means more competition for goods and services. Prices go up.<\/p>\n When that happens, the Fed\u00a0raises\u00a0<\/em>interest rates to try to get inflation under control by making it more expensive to borrow money. Saving becomes more attractive than spending, economic activity slows and highly leveraged companies and households find themselves squeezed\u2026<\/p>\n There\u2019s a lot of argument over just how effective the Fed really is at managing the economy. (After all, central planning has\u00a0never worked\u00a0<\/em>at a national level \u2013 ask the Soviets, or the Cubans, or the North Koreans!)<\/p>\n And when the Fed makes confusing choices, I really wonder what they think is going on\u2026<\/p>\n What does the Fed think is going on with the economy?<\/p>\n Since Trump won the election, we\u2019ve seen a lot of optimism! At the same time,\u00a0no one<\/em>\u00a0other than the outgoing President seems to believe the economy is bursting at the seams thanks to massive growth.<\/p>\n With inflation significantly above the Fed\u2019s 2% target and unemployment\u00a0well under\u00a0<\/em>its long-term average, what\u00a0should\u00a0<\/em>the Fed do? Seems obvious to me \u2013\u00a0raise interest rates,\u00a0<\/em>get inflation under control!<\/p>\n Right?<\/p>\n Well, as Alexandra Canal\u00a0tells us<\/a>, the latest CPI report rose 0.3% (up from 0.2% the month before) and the largest monthly gain since April. Annual CPI is officially 2.7%, another tick up from the previous 2.6% report.<\/p>\n \u2026not\u00a0too\u00a0<\/em>bad, you say? Well, core CPI (leaving out food and fuel prices, which do jump around a lot) came in at\u00a03.3%<\/strong>\u00a0\u2013 WAY above the Fed\u2019s target.<\/p>\n Core CPI tends to be stickier than plain old CPI \u2013 a bumper crop of wheat or an OPEC meeting can have a huge, if temporary, impact on food and fuel prices.<\/p>\n Regardless, 3.3% is significantly higher than 2%. Right?<\/p>\n The Fed claim to be \u201cdata-dependent\u201d (this seems to be Chairman Powell\u2019s favorite phrase \u2013 and honestly it sounds a lot better than \u201ctransitory,\u201d his\u00a0previous\u00a0<\/em>favorite).<\/p>\n Here\u2019s what the data say:<\/p>\n Inflation too high, unemployment low and GDP growth a smidge above average \u2013 should interest rates go up or down?<\/p>\n Surprise!\u00a0Down.<\/a><\/p>\n In a split vote, the central bank voted to reduce its benchmark interest rate by 25 basis points to a new range of 4.25%-4.5%, initiating its third consecutive rate cut of 2024 despite signs that inflation isn\u2019t entirely going away.<\/em><\/p>\n<\/blockquote>\n Not just down\u00a0today,\u00a0<\/em>but they\u2019ll\u00a0keep going down\u00a0<\/em>(just not as much as speculators hoped):<\/p>\n The consensus among Fed officials is for\u00a0<\/em>two\u00a0<\/em><\/strong>rate cuts next year, down from\u00a0<\/em>four\u00a0<\/em><\/strong>previously forecast in September.<\/em><\/p>\n<\/blockquote>\n So, the Fed cut rates,\u00a0again,\u00a0<\/em>and will\u00a0keep\u00a0<\/em>cutting rates. But not as much as they originally planned\u2026<\/p>\n So do they think that the\u00a0economy\u00a0<\/em>is too weak? They must, right? They\u00a0must\u00a0<\/em>believe that 3.7% inflation is the lesser of two evils.<\/p>\n Unless there\u2019s something else they\u2019re concerned about?<\/p>\n So what were they thinking? We have the answer from the horse\u2019s mouth:<\/p>\n [Powell] acknowledged some uncertainty surrounding the effects the new policies of the Trump administration may have on the Fed\u2019s rate path.<\/p>\n Some economists predict new trade, tariff, and immigration stances could be inflationary, posing new challenges for the central bank.<\/p>\n “We expect significant policy changes,” Powell said. “We need to see what they are and what effects they have. We will have a much clearer picture” once that happens.<\/p>\n The Fed, he added, is “thinking about these questions” but won\u2019t have definitive answers for some time yet.<\/em><\/p>\n<\/blockquote>\n Translation:\u00a0They don\u2019t know\u00a0<\/strong>what\u2019s going to happen in the years ahead.<\/p>\n Surprise!\u00a0<\/strong>Nobody else does, either.<\/p>\n The incoming Trump administration\u2019s significant changes to tariff and tax policy alone will upset the status quo. Hopefully for the better \u2013 possibly for the worse.<\/p>\n So, maybe the Fed isn\u2019t as concerned about inflation as they are about the economy\u2026 And that makes sense. Inflation punishes the working- and middle-class families the worst \u2013 while a broad economic downturn is bad for\u00a0everyone.\u00a0<\/em><\/p>\n Yes, the Fed\u2019s picking favorites. When you attempt to manage an economy from the top-down, there\u2019s no way to get around that. The Fed makes choices that are helpful to some and harmful to others.<\/p>\n Do you have more to gain, or more to lose?<\/p>\n Let me level with you: Ultimately, no one can control something as big and complicated as the world\u2019s largest economy. Not even the all-mighty Federal Reserve. They can\u00a0certainly\u00a0<\/em>put a thumb on the scale. They can choose who wins and who loses.<\/p>\n But we can decide to opt out of their game.<\/p>\n You can\u2019t control the national economy, but\u00a0you can control\u00a0your own\u00a0personal economy!\u00a0<\/em><\/strong>You can shelter your hard-earned purchasing power from the Fed\u2019s policies and missteps.<\/p>\n By diversifying your savings with assets that are largely immune to both the Fed\u2019s manipulations and the corrosive effects of inflation. And the\u00a0best\u00a0<\/strong>asset for this purpose has always been\u00a0physical silver and gold<\/a>. If you\u2019re ready to opt out of the Fed\u2019s game, learn more about\u00a0how to purchase physical precious metals<\/a>, whether for home delivery\u00a0OR\u00a0<\/em>with money you\u2019ve already saved for retirement. Learn more about the advantages of a\u00a0Precious Metals IRA<\/a>\u00a0here.<\/p>\n![](\"https:\/\/www.silverbearcafe.com\/private\/12.24\/images\/coal-investors-savers.jpg\")
Many people are wondering\u00a0what in the world<\/strong>\u00a0is going on with the Federal Reserve right now.<\/p>\nAnd what did the Fed actually do?<\/h2>\n
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Jerome Powell explains himself<\/h2>\n
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