The Federal Reserve has a legal dual mandate to minimize unemployment and price inflation. The current "dual" between the two mandates is to reduce price inflation by increasing interest rates to increase unemployment and kill businesses to choke off aggregate demand. Everything else, including the inflation and unemployment rates, is derivative of the primary mandate.
The Quest of the False Mandate In The Fed
- Of the twelve votes on the Federal Open Market Committee (FOMC), there are only four of twelve rotating District Bank presidents voting
- The central Board of Governors in Washington DC has seven voting members who are appointed by the President and confirmed by the Senate and has nearly twice the voting power over interest rate decisions
- Chairman (Powell) has the power of the bully pulpit and is the consensus builder on the FOMC
- We are told of the balancing of public and private (banks') interests controlling the Fed and some free-market supporters latch onto the influence of the private sector as an effective check on the Fed's enormous economic power
Revealing the Real Mandate
- The Fed's veneer of science in the service of the public good has worn thin
- In recent years, the Fed has become increasingly interventionist
- It has increased its domain to include longer term government debts of any duration, including thirty-year bonds
- Mortgages now make up a huge proportion of its balance sheet
- Quantitative easing (QE) has only reduced the overall Fed balance sheet from about $9 trillion in May to about $8.85 trillion today
- They have only raised the federal funds rate from 0 percent to 2.3 percent in 2022
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