Pandora has trapped the Federal Reserve

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Pandora's Box was opened by the Fed's in 2009, and Fake Zero Interest Rates escaped along with all the economic ills of MMT ("Modern Monetary Theory" where Deficits don't matter), QE 1,2, and 3 to bring misery soon to most of mankind. To compound that misery all the Central Banks around the globe followed the Fed, and now we have an entire global monetary system structured on excessive debt under MMT.

The Political Elite love MMT as they can borrow with impunity from their "independent" Central Bankers all the money required to fund the deficits necessary to buy votes to maintain control and power. For example: after the Great Recession of 2009 the Fed printed new money and started buying $2 Trillion of government debt, aka "U.S. Treasuries") under the guise of Quantitative Easing (QE1) for the purpose of reducing Unemployment below 6%. Coincidentally, this money also funded the Deficit.

In 2011 Standards & Poor downgraded U.S. Debt for the first time in history and Foreign Nations reduced their purchasing of Treasuries. The "independent" Fed then invented QE2 and QE3 to purchase $6 Trillion more of Treasuries and Mortgaged Back Securities — and Deficits were funded again. The Feds Balance Sheet had now ballooned to over $8 Trillion, and their massive buying of securities drove down interest rates down below 2% and on their way to 0%. This was a radical shift from how the "independent" Fed historically operated, and the Fed has no mandate to manage interest rate risk for the government.

The lower interest rates fell, the larger the annual Deficits as they increased from $500 Billion to $2 Trillion which now represents more than 8% of GDP (it was only 3.7% of GDP in 2022). Consequently, the National Debt has exploded from $9 Trillion in 2009 to $33 Trillion in 2023. The government cannot run such huge deficits forever; either they will need to reduce spending or increase taxes. Furthermore, the Fed cannot keep printing money and loaning it to ourselves with a straight face.

So, what's the problem? INFLATION and the Middle Class!!! The Fed's second mandate is to control inflation — which destroys the financial stability of the Middle Class who work and pay most of the taxes. Although the Fed says inflation is declining, the Middle Class does not believe them as the cost of living keeps on increasing. The Fed therefore has a serious conflict of interest today: it has a congressional mandate to control inflation and protect the middle class who represent most of the voters, or it can let inflation runaway again by lowering interest rates and make the Political elite and their cronies on Wall Street happy. The Fed is trapped!

Steve Gardes is a Certified Public Accountant (CPA) and Certified Valuation Analyst (CVA) with over 40 years of public accounting experience.