The politicians have left Chairman Powell and the members of the Federal Reserve System with an impossible task; containing inflation without causing a recession.
Since 2008-2009 the “No New Taxes” Republicans together with the “Medicare for All” Democrats have created an increase in the Federal Deficit now reaching 33 Trillion Dollars. Adding to that fiscal problem has been unpaid wars in the Middle East and the GOP fairy tale that “Tax Cuts Pay for Themselves.”
The Federal Reserve after stepping in during the financial meltdown of 2008- 2009 caused in large part by the greed of Wall Street’s financial engineering experts, has tried to maintain the recovery by printing trillions of dollars to keep the party going.
During these years, the politicians have refused to address the major problem of budget deficits by the only sensible compromise of raising taxes, closing glaring tax loopholes, and limiting military as well as social welfare spending.
This was not addressed during the past years, because the Fed’s easy money and money printing programs, gave the illusion all was well, while the deficits continued to grow.
The majority of this money printing effort ended up in the hands of Wall Street middlemen and Corporations who used the easy access to low interest rate money to buy back stock and consolidate businesses, reducing competition.
Now that the result of this money printing is showing up in the form of inflation, the Fed’s only recourse is to take away the punch bowl of easy money. However, that will only lead to a slowing of the economy and a probable business recession.
In addition, the higher interest rates will cause the Country’s annual debt payment obligations to increase, while the corporate and personal income levels start to decline.
Adding to those problems are the energy and food shortages growing out of Russia’s war in Ukraine.
This is a problem that calls for the Country to face up to reality together as the United States of America, rather than breaking apart along regional and religious differences.
Will it?
That’s the $33 Trillion Dollar Question.