The Federal Reserve and the Regime Are One and the Same

 According to a report from the Richmond Fed, When the United States entered World War II, the Fed became again a mechanism by which the government could more cheaply finance the war effort.

In April 1942, the Fed announced a policy of cooperating with the Treasury to keep interest rates low.

As Fed historian Allan Meltzer puts it: "The Federal Reserve's role was to prevent the market from failing to accept a Treasury issue; in practice that meant it supplied enough reserves to keep interest rates from rising around the time the Treasury sold its offering."1 Into the 1950s, the union between the Fed and the rest of the executive branch was explicit in legislation.

As annual federal deficits more than doubled from $10 billion to $25 billion each year in the second half of the decade, the new Fed Chairman Arthur Burns was clearly more than willing to do what it took to ensure that that there was plenty of "Coordination" between the Treasury and the Fed in order to achieve political ends.

The Fed embraced zero-interest rate-policy for an astonishing eight years, and in spite of seemingly endless proclamations of economic strength, the Fed refused to allow the target interest rate to rise.

From 2020 to 2022, the Fed bought up an additional three trillion in Treasurys with printed money reflecting its political commitment to facilitate new unprecedented levels of peacetime deficit spending.

According to a 2021 report from the Atlanta Fed, the Fed's covid policy was similar to that of the Fed's policies of the Second World War in that it was "a big increase in government debt accommodated by Fed bond purchases under an explicit commitment to keep interest rates at very low levels." Naturally, federal deficits and debt skyrocketed after 2020 and has never returned to pre-covid levels.

Rather, an honest look at Fed interventions suggests that the Fed never refuses to facilitate the federal executive branch in implementing its political program.

Even today, some more credulous observers still believe that the Fed is fighting the administration in the name of "Fiscal responsibility." These fantasies notwithstanding, the Fed has never done this, and the Fed is not doing it now.

What matters is what the Fed does, not what the Fed says.

History has shown us that when the Treasury needs help with some new political scheme-such as inflating bond prices or blowing up anew employment bubble-the Fed will give the Treasury what it wants. 

https://mises.org/mises-wire/federal-reserve-and-regime-are-one-and-same