What is the Federal Reserve Hiding From Us?
I understand that most Americans have no clue how the monetary system works in America. They don't understand the Federal Reserve and the US Treasury and how money is created for our financial system. That being said I believe most Americans can understand the simple idea that paper money isn't really worth anything beyond the paper it's printed on. It's only worth something because of the faith and confidence that people have in it on any given day. I'll take your $20 bill in exchange for 8 dozen eggs because I believe that I will be able to exchange that $20 bill tomorrow for some other product I need, like chicken feed.
But we also understand that if the US Treasury suddenly flew helicopters all over the country dropping billions of hundred dollar bills to scatter over the entire land that those paper bills would become worth less. And if you scatter billions more on another helicopter drop the next day you could shatter the faith and confidence in those paper bills and make them worthless.
Of course something is very wrong today with our financial system. Zero interest rates and the FED "buying" US Treasuries to make sure there is "demand" for them?
Increasing debt is not necessarily bad. However, when it grows much faster than the ability to pay for it, it becomes problematic. The ratio of federal debt to GDP stands at 125%, up from 105% before the pandemic and more than double the percentage from before the financial crisis.
The Treasury needs low interest rates and consistent buyers of its debt to keep such an unsustainable pace going. Through zero interest rates and purchases of $80 billion Treasury notes a month, the Fed fills both needs.
Here; What is the Federal Reserve Hiding from Us? - Articles - Advisor Perspectives
One day America will come tumbling down. It will happen because we are rejected the King of Kings, Jesus Christ, and started worshipping Mammon, the demon god of money and material things. Right now we are standing on the edge of the abyss. Many can't understand why it hasn't collapsed already but Bible readers understand that it will happen in God's perfect timing.
So don't cling to your money real tight. In another day, week, month or year it could start falling in value so precipitously that you will look for ways to get rid of it by trying to buy something tangible with it...if you can find any willing sellers.
Without extremely low interest rates to make the new and existing debt affordable, economic growth would disappear, and financial defaults would be plentiful.
The Fed must believe it must help Congress worsen the nation's fiscal imbalances versus dealing with the problem in a sustainable manner. Expediency at tomorrow’s cost, once again, seems to be winning the day.
Summary
The Fed does not want to pierce multiple asset bubbles or force the Treasury to pay normal market interest rates. The financial markets are extremely fragile, and the debt situation is unsustainable. Hiding such actions under the guise of appropriate monetary policy seems to be their modus operandi.
It will continue to use gibberish arguments to avoid addressing the real problems. William White, a distinguished economist with significant central bank experience, wrote: "Perhaps the real framework is anything that justifies not tightening?"
Use caution when investing. "The most inappropriate monetary policy" is the sole bedrock supporting the most egregious asset valuations in well over 100 years.