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By Gregory Mannarino, TradersChoice.net
The narrative coming out of the mainstream media outlets is laughable, especially regarding these so-called “monetary policy mistakes” being made by the Federal Reserve.
The two main questions being proposed by mainstream media commentators/comedic actors as of late are these:
Number one. How did the Federal Reserve get inflation so wrong?
Number two. How did the Federal Reserve allow themselves to get “so behind the curve” regarding raising rates to combat surging inflation?
The straight answer to both of these questions is this: the Federal Reserve is going out of its way TO CREATE INFLATION and therefore is not “behind the curve” at all—in fact, THE FEDERAL RESERVE IS THE CURVE!
It is the Federal Reserve who dictates monetary policy, PERIOD. It all begins and ends with them.
The Federal Reserve, despite a recent fractional 0.25% bump in the Federal Funds Rate, is continuing to fuel inflation—a point which Federal Reserve President James Bullard actually admitted to! Bullard said: “the current Federal Reserve monetary policy is creating higher inflation.”
To allow for a greater understanding of how this all really works, let me outline a few things for you.
For the Federal Reserve to make ANY difference whatsoever, in an actual attempt to slow inflation, the Fed would have to do MUCH more than just raising rates.
First off, the Fed would have to raise the benchmark rate HIGHER than the current rate of inflation.
Moreover, the Fed would have to drastically cut back on its asset purchases.
Currently in today’s case, the Fed is buying $80 billion worth of Treasury securities and $40 billion of mortgage-backed bonds each month—(taken from the Federal Reserve’s own website).
In addition, for the Fed to slow rising inflation, it would have to “unwind” their balance sheet—that is, sell debt on its balance sheet.
The Federal Reserve is mandated, BY LAW, to maintain price stability, in this the Fed has clearly failed, unless of course they are deliberately trying to inflate.
Moreover, the Fed is now pointing their finger at The War, Covid, and “supply chain disruptions” as the main causes of surging inflation however, Fed Chair Powell himself IS ON RECORD SAYING: “INFLATION IS LARGELY A MONETARY POLICY ISSUE,” which it is.
What absolutely must be understood here is this. The Federal Reserve is creating inflation deliberately, and this will not stop anytime soon.
Understanding that the Fed is intentionally fueling inflation, what we should be doing is taking the opposite side of that from a financial standpoint.
First, we should own/hold hard assets like physical gold and silver.
Second, we can gain exposure to commodities via an exchange traded fund (ETF)—and the reason for that is multiple fold but mainly this—commodities are priced in U.S. Dollars, and as inflation surges, the price of commodities will rise.