E No Fear Of Inflation; Threat Of Deflation

The Fed wants to have their cake and eat it too, but the cake is stale. Jerome Powell's remarks in testimony before the Senate last week provoked considerable attention.

Responses, interpretation, and analysis by observers were many and varied. Unfortunately, no one learned anything different from what they thought they knew before Powell's testimony. 

The Fed is well aware of the problem. It is systemic in nature and goes far beyond corporate due diligence, bank liquidity, and the safety of your broker.

Most everyone else (with the exception of Janet Yellen, Ben Bernanke, and Alan Greenspan) thinks they understand the problem, but their limited understanding doesn't allow for the subtleties of Fed Chair behavior. 

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Chairman Powell and his "inner circle" want very much for you to focus on inflation. By talking about inflation, they hope that possibly it will spur behavior that might provoke a resurgence of economic activity and stave off the coming economic collapse.

That last piece of stale cake is never as tasty and satisfying as the first piece, cut from that freshly baked culinary delight. It might do us all well to know what is in that cake.

The Fed's recipe has never changed. For more than one hundred years, they have been baking an inflationary cake that is making people sick. The cake is now old, stale, and crumbling.

Purpose Of The Federal Reserve

The Federal Reserve and all central banks, in conjunction with their respective governments, inflate and destroy their own currencies intentionally. It is a plan with purpose and real intent that allows banks to do what they do best - lend money.

The Federal Reserve was formed for the purpose of cultivating a financial system that would allow banks to create and lend money in perpetuity. 

The Fed creates the money and the banks lend it. Even retail banks create inflation by making loans to their customers via fractional-reserve banking. The Federal Reserve also makes sure that the US government has all the money that it wants to spend.

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Kelsey Williams is the author of two books: Inflation, What It Is, What It Isn't, And Who's Responsible For It And All Hail ...

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William K. 1 week ago Member's comment

Interesting and depressing, even rather alarming. I had not considered deflation as a threat or as a possibility. Certainly the supply of money can shrink if folks save instead of spend, but the banks are supposed to solve that problem by renting the money from depositors and then loaning it out and charging enough interest to pay for the rental. Presently banks are not offering any rental payments for money, and not charging rent on what they do pay out.That is not the way to gain any profit. And when a business does not make any profit, ususlly the result is a COLLAPSE.

Kelsey Williams 1 week ago Author's comment

The world economy is funded with cheap, over leveraged credit. A credit collapse this time around will likely overwhelm anything the Fed can do to stave off total economic collapse. End result would be full-scale depression.

Thomas Mitchell 1 week ago Member's comment

I've always thought that there needs to be a period of deflation to wipe out inflation excess.

Can you provide examples of "bond market is shouting that a credit collapse, deflation, and economic depression are on the horizon." Would be nice to follow those indicators.

Kelsey Williams 1 week ago Author's comment

Interest rates on 20-year US Treasury Bond have more than doubled since last August from less than 1% to more than 2%. The corresponding drop in value of the bond itself is more than 20%. Those are huge moves in a bond market that is already over leveraged and teetering precipitously.