On Wednesday, the Fed raised interest rates by 75 basis points—the largest increase seen since 1994.
But, this isn’t the last we’ll see of high rates. Fed Chairman Jerome Powell said that Americans should expect either a 50 basis point or a 75 basis point increase at the July FOMC meeting. Furthermore, many Fed officials see the benchmark rate being above 3% by the end of 2022.
Wells Fargo economists are predicting that the U.S. will tip into a recession in 2023.
So, inflation and interest rates are only going to go up, what does all of this mean for you and Americans who are struggling financially? We spoke with New York Times bestselling author/radio and TV commentator Charles Goyette to find out.
Red Rock Secured: “What are the Fed interest rate hikes, and why are they happening?”
Goyette: “Okay, so the Federal Reserve has increased the Fed funds rate, which is a policy rate, it’s a rate that they target for interbank lending. Banks move money back and forth between themselves in the overnight markets and so on to meet reserve requirements or for other reasons, and so the Fed sets conditions so that the Fed funds rate moves up to its policy rate or down to a lower rate, as the case may be. So, they’ve increased the Fed funds rate by three-quarters of a basis point in the pretext that they are serious about doing something about inflation that is driving the American people to the poorhouse.”
Red Rock Secured: “So this most recent rate hike is a pretty big deal. We haven’t seen an increase like this since 1994. And it doesn’t look like it will end there. Fed Chairman Jerome Powell says we should expect either a 50 or 75 basis point increase in July. Some Fed officials see the benchmark rate hitting above 3% by the end of the year. What can we expect to see in the coming months?”
Goyette: “You can expect to see nothing but abject confusion. You know, the dollar, paper money, unbacked money, is a confidence game, and the way the Fed has been reeling and lurching from policy to policy is an utter destroyer of confidence, and the effects will be felt on the American economy. The raising of interest rates raises, the costs of production, the cost of doing business, so it tends to slow down the economy. The economy is already slowing; retail sales are down, auto sales are down, and now we actually hear, officially or semi-officially, I guess, from the Atlanta Fed that we are looking at a recession because for the second-quarter ending in June, the U.S. economy is apparently, as they reported today, reportedly flat or zero growth. So, we’re going to have two quarters in a row that look like negative or flat economic growth. That’s the definition of a recession.”
Red Rock Secured: “After the Fed raised rates yesterday, Wells Fargo economists predicted that our economy could tip into a recession in 2023. What should people be doing now to prepare?”
Goyette: “So, as I always tell people, when there is blood running in the canons of Wall Street, when there’s a problem with the confidence in the monetary authorities and with the currency, head to gold. And I’m serious about that. We have been through this so many times. I suppose the best thing I can do to explain this to people is [to] tell you a little bit
about the confusion that the Fed has been showing in the last few months. So, as you mentioned, the Fed has now raised the Fed funds rate by three-quarters of a point, 75 basis points. They [Fed officials] told just last month, Chairman Powell said just last month basically that, ‘no we’re not going to do three-quarters of a point. We’re not going to. We’re not going to do that,’ and today they did. This is symptomatic of the policy confusion of the people that you know didn’t know that inflation wasn’t transitory, so [Treasure Secerety] Janet Yellen is on an apology tour well saying, ‘Well, I didn’t really understand. I didn’t know what was going on and so on.’
The Fed says that, ‘you know, we’ve got a serious problem with all the bonds, the treasury bonds, the mortgage bonds that we’ve purchased over the years, inflating the money supply, so we’re going to start to roll those back.’ But, they’re really not serious about it because they have barely started. They’ve dipped a toe in the water and say, ‘well we’re going to really get to it seriously. The full-scale rollback of this stuff may be in September. Well, the American people are in crisis today. Grocery prices are off the charts. Gasoline, off the charts. the problem is today, yet continue to pussy foot around with this, you know, marginal little step after step after step.
I’ll tell you what the real problem is. The Fed really doesn’t believe that it is responsible for the destruction of the purchasing power of the dollar. They don’t believe that they are responsible for 8.6% consumer price inflation. They don’t believe that they are responsible for double-digit producer price inflation. They actually think, they think that it’s all the fault of Ukraine, supply chain problems, and so on, so all this time, you know, when you wonder, ‘why don’t they attack inflation?’ Why do they say it’s transitory?’ They have been playing a waiting game, hoping that the other problems would go away and they wouldn’t have to address the problem of the immense ballooning of the money supply and so on, as though the $8 trillion that the Fed has created since the last major downturn, the Great Recession, doesn’t matter. As though the $4.5 trillion that they have printed up, made up out of nothing in just the last couple of years, has no impact. They’ve never apparently understood the quantity theory of money, and with the increase of the quantity of money, the purchasing power goes down. So, they’ve been playing a waiting game. They’ve been shuffling their feet and they still aren’t serious.
And Kaylee, just to add one more point to it. The financial press, you know, is kind of like a lap dog of the institutions. The financial press will tell you, ‘oh, this is a monumental rate increase. Yeah, it’s a big rate increase that’s going to make a big difference.’ If the inflation rate is 8.6% and they’re trying to get interest rates under control, if the inflation rate is 8.6, they raise the Fed funds rate and it’s still seven points below the inflation rate. So, interest rates are still negative and the economy, which is what got us into this mess in the first place. So, they continue to dilly and dally and to lurch from one policy approach to another, and the problem for the American people and the confidence of the dollar persists.”