CONK!
Take a few minutes and read the recent piece by Paul Davidson in USA Today about whether the Federal Reserve should lower interest rates in March or no later than June to fight a recession.
Davidson and the economists he interviewed do not mention the Fed’s inflationary policies that increased the money supply by trillions of dollars in 2020 and 2021. This huge surge in “new money” was the primary reason for inflation reaching a peak of 9.1 percent in June 2022.
Increases in the money supply is the cause of price inflation. And the Fed’s driving down interest rates to nearly 0% for several years is the cause of an overheated economy that eventually leads to a recession. The Fed’s hiking of interest rates is its reaction to the inflation it caused in the first place.
In short, the Fed causes inflation and recessions. The proper monetary policy is for the Fed not to do “quantitative easing” like it did for two years to boost the economy during Covid and it should not manipulate interest rates to goose production and employment.
In other words, the Fed should close its doors or at the minimum stop inflating and that would end the boom-bust cycle. As Ludwig von Mises observed decades ago:
“The wavelike movement affecting the economic system, the occurrence of periods of boom which are followed by periods of depression is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion”. Human Action, p.572
If the Fed lowers interest rates in 2024, it means the economy has indeed entered a recession and this will be followed by another round of inflation and then the inevitable bust down the road. Currently, the economy is indeed weakening. It is not as strong as the economic data suggest.
In the meantime, don’t let the headlines spook you. If you are concerned about being laid off, get a side “hustle” ASAP to earn some extra money before a pink slip could your way.
Tom Woods provides tools to increase your income. https://tomwoods.lpages.co/my-crash-course/ and https://tomwoods.lpages.co/online-course-profits/.
Take advantage of the free advice.
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Every Wednesday at 11:05am talk show host Gary Nolan and I discuss the economy and politics. The Fort Myers Mises Circle presentations are available online.
Latest podcast on healthcare with host Johnathan Westover; Incentivizing wellness podcast with Bernadette Pajer; the Human Action podcast with Bob Murphy on my American journey; Joseph Cotto and I discuss Argentina and the US, and the Human podcast with Bob Murphy on healthcare; Robert Scott Bell and I discuss healthcare on the second hour of his podcast.
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Murray Sabrin, PhD, is emeritus professor of finance, Ramapo College of New Jersey. Dr. Sabrin is considered a “public intellectual” for writing about the economy in scholarly and popular publications. His new book, The Finance of Health Care: Wellness and Innovative Approaches to Employee Medical Insurance (Business Expert Press, Oct. 24, 2022), and his other BEP publication, Navigating the Boom/Bust Cycle: An Entrepreneur’s Survival Guide (October 2021), provides decision makers with tools needed to help manage their businesses during the inexecrable business cycle. Sabrin’s autobiography, From Immigrant to Public Intellectual: An American Story, was published in November, 2022.
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