Listen to my May 6 Alternative Visions show where I explain that the policy makers & politicians of both parties in Washington have now decided the Fed needs to precipitate a recession in order to dampen inflation. Forget price controls on gas, oil, energy and food–as the US had done in previous decades before Neoliberalism. Now the ‘solution’ is to destroy household-consumer Demand to resolve what is essentially a Supply problem created by Covid 2020-21 and now US sanctions & war in Ukraine. New forces are also now coming on line that will further exacerbate inflation as well. Today’s recession shares many similarities with the 1981-82 Reagan recession in which the Fed provoked recession to quash Demand to address Supply forces which, then as well as now, can be traced to global oil and energy corporations. (Current recession will also have overlays of the 2001-02 tech corp crash and 2001 recession. And watch out for eventually financial instability (2008-10) and potential further source, as some key financial asset market implodes (tho it won’t be housing). And as US slips into recession amidst rising inflation, politicians attempt to divert attention with War and other ‘Identity’ issues. US elites are increasingly bankrupt as resolving America’s growing and converging crises.
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SHOW ANNOUNCEMENT:
The Federal Reserve’s decision this past to raise interest rates immediately by half percent—to be followed by further half percent hikes in June & July and still more increases the rest of the year—means Capitalist economic policy is now to precipitate a recession in order to deal with rising inflation. The question now is not whether, but when, recession comes in the US. Will it be before the end of this year, or early next. And how deep will it go? Dr. Rasmus describes the current Anatomy of Recession in the US: global and domestic supply chain problems that emerged last summer 2021 + monopolistic US corporations price gouging + commodities inflation due to US war sanctions on Russia this year + business productivity collapse leading to pass through of their rising labor costs + emerging inflationary expectations. All together ensure continued inflation in 2022. Rasmus discusses whether the Fed can address these mostly Supply side causes successfully. The US experience of 1981-82 recession is compared to 2022. Can Fed destruction of household-consumer Demand again today achieve inflation control? How deep a recession precipitated by Fed interest rates be required? What’s happening in the stock markets with its wide 1000 point daily swings? Why a ‘soft landing’ of the US economy won’t occur, given the already 1st quarter contraction of the US GDP and concurrent slowdowns in China, Europe and emerging market economies as Fed rate hikes drive up the dollar and ‘export’ recessions abroad.
Dr. Jack Rasmus @drjackrasmus
Jack Rasmus 
THE FED SHOULD NOT RAISE INTEREST RATES
The Federal Reserve Board (FRB & Fed) is a very inefficient and dangerous entity.
Congress tasks the Fed with assisting the pace of the economy, maximizing employment and maintaining a stable dollar.
The Federal Reserve System supervises and regulates banks to promote the safety and soundness of the banking system to foster stability in financial markets to ensure compliance with applicable laws and regulations.
The current protocol used to accomplish its main tasks of assisting the pace of the economy, maximizing employment and maintaining a stable dollar is by managing the money supply and adjusting interest rates.
Historically, the Fed lowers interest rates to stimulate the economy and raises rates to
slow the economy. The purpose of slowing the economy is to mitigate inflationary pressures.
We are, currently, involved in an economy that has been infested with inflationary pressures. These pressures have been fed by President Biden inhibiting our production of domestic energy. Unfortunately, our Fourth Estate has not queried the Executive Branch to determine why he has taken these actions.
Upon assuming Office, President Biden issued various Executive Orders some which reduced our capacity to produce fossil fuel energy. Prior to his actions, this nation was energy independent and were progressing to increase our production of fossil fuels. The price of crude ranged from $45 to $65 per barrel, thus averaging $55 per barrel.
When our output was cut, the price of crude increased. The price of crude was $52.98 on January 19, 2021. The price accelerated to $74.10 on July 12, 2021, and hit $88.15 on January 31, 2022. The average price of crude was greater than $95 for the past three months which has provided an additional $40 per barrel in excess of the $55 pricing which enabled Mr. Putin to better afford his insidious incursion into Ukraine. He has an extra $220 million per day (5 ½ million barrels @ $40), augmenting Russia’s oil revenue of $302 million per day (@ $55 per day). Without President Biden inhibiting our
fossil fuel production, Russia would have substantially less funds with which to process the “war”. As soon as Biden inhibited our output, Putin knew he would have this windfall of funds which was a piece of the puzzle he used to determine Russia’s actions against Ukraine. One might assume that Biden’s XO’s benefitted Russia and damaged us. One might speculate that the Fourth Estate would be inquisitive as to why he took those actions.
The increase in crude pricing is the main cause of our inflationary pressures. The cost of manufacturing, cost of filling our vehicles, cost of distributing product throughout the system, the cost increases to our food supply, etc. This appears to be damaging to We, the People. Again, one might think that those curious minds within the Fourth Estate would inquire as to the rationale for his actions.
The second cause of our inflationary pressures is that legislation was passed to pay workers not to work, thus we were maintaining income flow to workers while fewer goods and services were being offered to soak up those funds; increased or same demand with fewer goods and services stimulates inflation. More questions for the Fourth Estate.
Now, the Fed enters the fray. The Fed, led by Chairperson Jerome Powell, is on a path to increase the short-term rates, federal funds and discount rate by about 250 basis points over the next year or so @ 25 to 75 basis points per move. Further, the Fed will admit that it may take 12 to 18 months to recognize the effects. The protocol appears to be a shotgun approach, i.e., not very accurate.
The Fed appears to be a quasi-criminal enterprise (please don’t let this scare you off)
Have you noticed we almost always overeat @ Thanksgiving?
It takes 10-12 minutes for the brain to sense “fullness”.
Unfortunately, we continue to eat after we are full but our brain
enables us to eat another 10-12 minutes as we haven’t realized
that we were full, 10-12 minutes ago.
The Fed tells us that rate increases may take 12-18 months to
become effective.
Once the Fed senses “fullness”, it is 2 or 3 rate increases beyond
“fullness” which too many times has stimulated a downturn.
Thus the Fed, at best, must pause for the cause.
The Fed has, also, indicated it wants to increase rates so when a recession
hits, it can lower rates to stimulate; INSANITY; set the fire and then come to the rescue? A pyromaniac firefighter?
Based upon the foregoing, let’s “think”.
If we accept that our current malaise of inflation has been, mainly, caused by (unforced) higher energy costs and a “one-time” flood of money into the system, while workers vacationed, the normal protocol of increasing rates to moderate the economy appears somewhat ignorant (perhaps insane is a superior descriptor) especially since the economy shrank in the first quarter. A better solution might be to stimulate a substantial increase in the production of oil and gas. All regulations and controls must be eliminated. Two to three million barrels a day should be released from the SPR. Crude prices should drop, significantly, causing Russia’s oil income to drop. Our domestic energy costs will be reduced and within 4 to 6 months, those reduced costs will affect our economy. Interest rates should not be increased by the Fed. The results should enable our economy to eliminate a recession.
If we don’t take those few actions and the Fed persists in raising rates, we will, probably, be deep in a recession or worse. The higher rates will precipitate a reduction in real estate and our stock markets. Those reductions will inhibit our economy since, collectively, we will spend less because we will feel less wealthy.
michael zitterman
mikiesmoky@aol.com
May 4, 2022