Fed Chairman Jerome Powell just completed his two-day meeting with Congress, and I must say it was very hard to watch. The Fed chairman is just another mouthpiece for the political party.
So many things he said that were wrong and just rubbed me the wrong way. For example, one of the comments chairman Powell address was the relationship between inflation and low unemployment.
“The economy can sustain a much lower level of unemployment than we thought without troubling levels of inflation.”– Fed Chairman Jerome Powell
For some odd reason, the media and many market pundits or even the Fed chairman himself believe that inflation goes hand in hand with unemployment. If the unemployment level is low, one can expect the rate of inflation will begin to pick up, a bunch of nonsense.
Inflation or the rise in CPI has nothing to do with the unemployment rate and vice versa. Let’s take a look at this chart, which shows the rate of the core CPI and the levels of unemployment.
As you can see, unemployment levels have made some significant changes, zig-zag, up and down, some vast moves and some small ones. Furthermore, the historical trend for unemployment is neither ascending nor descending pattern; it’s pretty flat.
However, the Core CPI chart has gone nowhere but up and at a constant rate. Even when unemployment raises or drops dramatically, there’s no rate of change in the core CPI chart.
What’s funny is when unemployment rises, the CPI should fall, but it doesn’t it has gone nowhere but up, this is because the rise in consumer prices has nothing to do with unemployment. Instead, the increase of the CPI has everything to do with inflation.
Jerome Powell’s Lack of Understanding
No, not the inflation everyone talks about in regards to an overheating economy, but the real definition of inflation; increasing the money supply. Yeah, money printing, something the FED is known for as it has a $3.8 trillion balance sheet to show.
So Jerome Powell trying to link the unemployment rate along with inflation is nothing but a lie. A way to hoodwink the general public into believing that inflation is due to economic factors instead of bad monetary policy. Yeah, the FED doesn’t want to take responsibility for the destruction of the dollar.
However, I can’t place all the blame on the FED, the White House, and Congress has to accept some of the responsibility as well. After all, the only reason why the FED is acting the way they are to help maintain the illusion that our federal government is solvent. But the truth is the Federal government is completely insolvent and is unable to pay its bills without these low rates.
Furthermore, without the FEDs manipulation, this country would have gone bankrupt years ago. Soon the time will come when our government will be forced to deal with its insolvency, and when it does, it won’t be pretty.