Powerless
Tags: , Ben Bernanke, federal reserve, interest rates, portrait of the day, sketch of the day
Ball point pen on the morning newsprint
The Fed basically has one tool in the shed. If inflation is detected, they could increase interest rates and slow the economy. If a slowing economy is detected, they could lower interest rates and spur the economy. Since business is reluctant to raise prices during a slowing economy, inflation and a recession are almost always mutually exclusive. But our government has thrown another variable into the mix; a huge debt and a falling dollar. Even if world prices stay the same, the shrinking buying power of the US dollar will make it seem like inflation. Now we have a slowing economy and inflation, so what can the fed do?…. nothing.
Yesterday the Federal Reserve left interest rates unchanged.