It’s time I write a post about Arthur F. Burns, The Former Federal Reserve Chairman Who Failed To Comprehend the Effect Price Controls would have on Inflation – August 18, 2022,
When most people think of Donald Trump, they remember Ronald Reagan; when I think of Donald Trump, I think of Richard Nixon because the two, for me are the type of individuals who will let you down on the most IMPORTANT issues. If you’re of those people who imagine that lower interest rates from the Federal Reserve equate to the PRIVATE banking sector printing money IRRESPONSIBLY, you’re 100% WRONG!
Sure there will be some banks who will print to much money and have financial problems because some business people are idiots, but most PROFIT DRIVEN banks, are imagine potential FUTURE costs and will even anticipate FUTURE government regulations based on past events, which is why in Canada as an example has a relatively strong banking PRIVATE banking system.
In Canada, the FEDERAL government has been big for a long time and often leans on the Canadian Private banks to provide liquidity to Big Businesses that will likely generate reliable capital for the Canadian Federal government; private banks in Canada were often responsible for the regulatory framework that governed their financial behavior in Canada, which again led to Canada, having a private financial sector that’s enjoyed all over the world.
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In 2007-2008 in the United States, the Private banks learned the hard way not to trust the Federal Government, the root cause of the 07-08 housing market crash in th U.S happened because of the Federal Government wanting to turn more Americans into homeowners, the NINJA loans or the No income, no asset (NINA) Loans, would dhav NEVER happened had George Bush’s administration not forced it through. During that era, the banking sector wanted to accommodate Government initiatives, and I assume some private banks trusted that the government knew what they were doing.
Anyway, the NINJA loans caused the housing crash and the private banking sector, obviously not wanting to be NATIONALIZED, changed their lending behavior; why I bring this up is because when the Federal Reserve raises interest rates it has NOTHING to do with the PRIVATE SECTOR and everything to do with the PUBLIC SECTOR.
What people tend to forget about Ronald Wilson Reagan was that, UNLIKE Donald Trump, Ronald Wilson Reagan fixed the U.S economy with abnormally high-interest rates. If people remember, as soon as Jerome Powell began raising interest rates, the Donald started to complain about it publically because apparently, the best economy the world has ever seen could not handle a few interest rate hikes.
I’m not a fan of Joe Biden, but to date, Joe Biden has yet to complain about Jerome Powell raising interest rates. How this relates to Arthur F. Burns is that are arguing Jerome Powell is going to make the same mistake Arthur Burns made? Will he? I don’t know, how could I know? What appears apparent to me is that I think most people miss, is that MONEY PRINTING is NOT the problem.
Confidence in the U.S dollar is strong; there’s actually not enough U.S dollars to go around, the world is actually demanding payment in U.S dollars, and Jerome Powell is actually at war with the FEDERAL GOVERNMENT! It’s government regulations, government price controls, and government taxation on the economy that’s fueling DOMESTIC price inflation.
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Foreigners are LOVING the U.S dollar, and I have to remind the reader that the U.S dollar is a FIAT dollar; it’s not backed by anything but INTEGRITY. The task of Jerome Powell is to bring the INTEGRITY back to the U.S dollar, and he does this by making Joe Biden PAY a high price for his reckless behavior. Jerome Powell appears to understand POLITICS and he appears to comprehend his role in all of this.
Powell was actually doing Donald Trump a FAVOR when he raised interest rates; I found it funny that as soon as the opportunity presented itself, Donald Trump began showering voters with free money, which would have been more expensive to borrow, had interest rates been normalized during Donald Trump’s tenure. When Richard Nixon defaulted on U.S foreign debt obligations, a lot of people only talk about Nixon delinking the U.S dollar from the Gold Stanard.
What’s often ignored in that very same speech are PRICE CONTROLS; people forget that during that speech, Richard Nixon attempted to sell Americans on tariffs and price controls, which for me is the REAL reason inflation ran rampant.
Sure, I’m a gold bug myself, but during the reign of Nixon, Americans didn’t own much gold anyway; the most tyrannical and beloved President in U.S history, Franklin D. Roosevelt(FDR), banned bullion ownership for Americans, and because Americans loved him so much, generations of Americans thought it their PATRIOTIC duty to do as the President advised and avoid Gold Bullion ownership.
People think Joe Biden is the first idiot to be in the White House, no, Joe Biden is the first idiot to be in the white house in the Internet era. We get to see Joe Biden up close sometimes daily, which allows us to observe how stupid the man is, but he’s not the first idiot to be the leader of the most powerful country in the world.
One of the benefits of having a Democrat in power is that they have a low financial IQ; unless one of Joe Bidens trusted handlers tell him to tell power to lower interest rates, Joe Biden will likely sign any bill that allows him to buy votes. Meaning that Biden will gladly spend money Americans don’t have during a tightening cycle.
Now, it’s Jerome Powell’s job to keep government spending in check! Although Nixon was a Republican, he was an economic ILLITERATE, and Arthur Burns, instead of teaching Nixon a lesson about why price controls are a stupid idea, instead imagined that price controls weren’t that big of a deal, and inflation took off economically, Nixon almost getting impeached was the best thing to happen to him, because when he stepped down, Jimmy Carter who definitely had no clue as to what was happening in the economy, took all the blame.
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Arthur Burns had the opportunity to put Nixon and Gerald Ford in check, but he didn’t because he didn’t know how to. Obviously, Jimmy Carter, as clueless as he was, made George William Miller his guy, and both were not remembered favorably in history because of Ronald Reagan and Paul Volcker behaving like MEN!
You have to remember what Reagan inherited and what he allowed to let happen. As I explained, Donald trump started to complain with a few basis point hike. Trump clearly can’t stomach not being liked publically, whereas Joe Biden appears to shine brightest when he’s not liked. I’ll give Biden credit where it’s due; he sure has a lot of confidence for a man that dumb and… I think Jerome Powell should use that to his advantage and keep hiking rates.
As we all know, labor unions are all about PRICE controls and using the force of government to prevent competition in the marketplace, Joe Biden is on board with their silly labor union agendas, and the best way to make Joe Biden think twice about rewarding stupidity is to make the price for stupidity very expensive.
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If I were Jerome Powell, I would keep raising interest rates until I got fired because in case you’re not paying attention, the U.S economy is going to crash even if interest rates are NEGATIVE! Joe Biden and the Democrats have OVER REGULATED the U.S economy; however, the U.S dollar is still STRONG! Meaning that AUSTERITY MEASURES could fix the U.S economy in 2-3 years, from the crash date, under the right leadership.
People tend to forget that fiat money is indeed a confidence-based currency, and as long as the private banks aren’t nationalized, and people have faith in the currency, the American economy CAN remain strong. I’m in no way referring to the U.S dollar being sustainable in its present form forever; I’m merely referring to the here and now.
Right now, Powell can get Federal Government spending under control, but will he? I’m not sure; Arthur F. Burns certainly couldn’t do it; what I’m not entirely sure of is if Arthur Burns either didn’t understand the Federal Reserves’ role or if he was too scared to do what’s right. When you read up on a lot of Fed Chair people, a lot of them were indeed clueless; Jerome Powell is not clueless. There’s someone home there; with that said, I don’t know if Powell has the BALLS to keep raising rates.
Interesting times ahead!