5 things to know about the Fed’s biggest interest rate increase since 1994 and how it will affect you

  The Federal Reserve on June 15, 2022, lifted interest rates by 0.75 percentage point, the third hike this year and the largest since 1994. The move is aimed at countering the fastest pace of inflation in over 40 years.

  Wall Street had been expecting a half-point increase, but the latest consumer prices report released on June 10 prompted the Fed to take a more drastic measure. The big risk, however, is that higher rates will push the economy into a recession, a fear aptly expressed by the recent plunge in the S&P 500 stock index, which is down over 20% from its peak in January, making it a “bear market.”

Ignoring the Constitution

  Constitutional violations have become so commonplace in American life that when they occur, the reaction among many Americans is ho-hum.

  There are two classic examples of this phenomenon: the declaration of war requirement and gold and silver as legal tender.

Fed’s rate cut signals a recession may be ahead – and it may not have enough ammunition to fight it

  The Federal Reserve seems a lot more concerned about the state of the economy than it’s been letting on.

  The Fed lowered its target interest rate by a quarter-point on Sept. 18, the second such cut since July – and the first reductions since the Great Recession more than 10 years ago.

  Judging by the words of Fed Chair Jerome Powell, this isn’t that big a deal. In his statement following the decision, he said: “We took this step to help keep the U.S. economy strong in the face of some notable developments and to provide insurance against ongoing risks.”

Stop the president from managing the economy

  For the past two years, President Trump and his loyal army of Trumpistas have been trumpeting what they say is Trump’s fantastic management of the economy. The stock market is soaring and unemployment is down, they crow. This shows, they say, that President Trump has been a great manager of the economy.

  Now that presidential campaign season is kicking into gear, Trump and his Trumpistas are getting nervous because it seems like economic hard times might be looming on the horizon. Does this mean that Trump has actually mismanaged the economy, especially with his out-of-control federal spending and debt and his destructive trade war against China?

Waiting for a check to clear sucks. The Fed wants to fix that.

  Many people have shared the experience of depositing a check and then waiting while it takes days to clear; the money is there, but not there.

  For low-income people, that experience isn’t just annoying. It can also be a real financial hardship. Mismatches between available funds and expenses can create a spiral of bank overdraft fees and denied transactions, and the deeper in someone gets, the more insurmountable it can feel.

  “It’s very embarrassing,” a commenter told TalkPoverty, describing a day of being hit with three separate overdraft fees while waiting on processing for a paycheck.

Richard M. Ebeling: The myth that central banks assure economic stability

  The world has been plagued with periodic bouts of the economic rollercoaster of booms and busts, inflations and recessions, especially during the last one hundred years. The main culprits responsible for these destabilizing and disruptive episodes have been governments and their central banks. They have monopolized the control of their respective nation’s monetary and banking systems and have mismanaged them. There is really nowhere else to point other than in their direction.

  Yet to listen to some prominent and respected writers on these matters, government has been the stabilizer and free markets have been the disturber of economic order. A recent instance of this line of reasoning is a short article by Robert Skidelsky on “Why Reinvent the Monetary Wheel?” Dr. Skidelsky is the noted author of a three-volume biography of John Maynard Keynes and a leading voice on public policy issues in Great Britain.

Jacob G. Hornberger: The pathetic U.S. golden dollar

  I recently received a U.S. golden dollar from a vending machine. What a pathetic thing. Golden in color, Wikipedia reports that it actually has “a copper core clad by manganese brass.”

  Needless to say, this golden coin is nothing like the gold coins that, along with silver coins, were the official money of the American people for more than a hundred years. The gold coins that Americans used throughout the 1800s and into the early 1900s were real gold coins, not alloyed coins consisting of base metals, like today’s golden coin.

Norbert J. Michel: Ease up on easing?

  Two reasons the Federal Reserve should stop trying to stimulate the economy:

-The policies it has enacted so far have contributed very little to the economic recovery.

-It has likely already reached the limits of what monetary policy can do to boost the economy.

Sheldon Richman: Inflation is the last thing we need

  "Some economists say more inflation is just what the American economy needs to escape from a half-decade of sluggish growth and high unemployment," the New York Times reports.

  One is Harvard economist Kenneth S. Rogoff, quoted in the Times: "Weighed against the political, social and economic risks of continued slow growth after a once-in-a-century financial crisis, a sustained burst of moderate inflation is not something to worry about. It should be embraced." He favors an annual rate of 6 percent.

Jacob G. Hornberger: Germany’s repatriation of gold

  Germany has announced that it’s going to repatriate 374 metric tons of its gold that it has stored with the Federal Reserve in New York City. While Germany claims that it will continue leave 1200 tons of gold in the United States, this might actually be the start of a full removal of its gold and its return to Germany. In fact, Germany also announced a full repatriation of all 374 metric tons of its gold from France.

  Why would Germany do that? It says that the reason is so that it can have plenty of gold reserves available at home in the event of a monetary crisis. The gold would enable Germany to purchase foreign currencies or, actually, most anything else, in the event of a crisis, reflecting, once again, that gold is real money.

Sheldon Richman: Government shows itself impotent on economy

  It should finally have dawned on the American people that the politicians who presume to guide the economy have no bloody idea what they’re doing. We’re long past the time when knowledge of economics was required to see that the government is impotent when it comes to creating economic recovery. If you want evidence of that impotence, just look around.

  Governments are very good at creating recessions and at impeding recovery. That is the limit of their powers. If you expect something constructive, you’ll be disappointed. Politicians from President Obama on down will promise the moon, but they will deliver only worthless rocks. They will blame everything and everyone for their failures, but their inability to succeed has one source only: the political process — which is founded on force, not peaceful economic cooperation — is singularly inappropriate for creating prosperity.