The Fed will now adopt a flexible 2% average inflation target, as inevitable deflation kicks into high gear – September 2, 2020,

One of the topics I write most about on this blog is Austerity measures, in the way of human prosperity is a big ole entity we all call ‘GOVERNMENT’. The U.S Federal Reserve is the worlds reserve currency, which means it’s supposed to mimic free market conditions, of course, the Federal Reserve has failed miserably to do this, but it appears, that Jerome Powell has abandoned the Ben Bernanke approach which drew all the attention on the Fed and Powell is shifting the blame to the Governments of the world.

The prior target inflation rate targeting shifted the blame away from where it needed to be and instead brought unnecessary attention to the Federal Reserve. I personally believe this all started because when Barack Obama inherited the Bush economy, Ben Bernanke and probably the powers that be felt the need to take the burden off Barack Obama, who was America’s first Black President and obviously not well versed on the U.S economy.

As David Stockman points out, the economy should have crashed under Obama, because the crash at that time would have been minuscule compared to the problem we have now. The problem with the economy crashing under Obama however would be his response. Since Franklin D. Roosevelt the Democrat’s response to market crashes have always been to add more job-killing regulations to the economy.

Under FDR he created the New Deal and then came with the new deal 2 because the first new deal was horribly written, then after the new deals, America found itself in a war, because of this war America had to sever ties with the gold standard, inflation ran rampant and was only calmed by former Fed Chair Paul Volcker’s willingness to let interest rates climb.

After this event, the world got comfortable trusting the Federal Reserve and therefore the U.S fiat standard is still holding firm to this day. Now, to give the markets some juice under Obama, the fed had inflation targeting, Obamas economy was so overly regulated that the markets were finding it hard to find profits, but the Fed came along and made itself the center of attention for the markets.

Well, Jerome Powell has officially changed course and the blame will be put squarely on the governments of the world. Trump had been openly challenging Jerome Powell to lower interest rates, eventually, Powell obeyed, but this coronavirus pandemic has provided the Federal Reserve an escape plan and Powell took advantage of it.

Now, what would happen in a free market economy is deflation, however with America’s Keynesian economic model governments are going to borrow and governments are going to grow, what’s uncertain is the private sector of certain countries, namely the countries whose governments think that now is a good time to overly regulate their economy while simultaneously borrowing more money.

What Powell has basically said is the Fed is here to provide liquidity, but you’re on your own with inflation targeting.

What this means is FINANCIAL defaults by governments will be covered up by printing/borrowing money, which ultimately leads to the debasement of a lot of different currencies. The Federal Reserve despite what people think isn’t the main problem, the main problem is federal governments all over the world making promises to voters that they can’t keep.

I hear it all the time, especially from the Libertarians, this is all the central bank’s fault. I disagree with that statement, the problem is ALL OF US! We all in some way shape or form want something for nothing, First thing I don’t understand about Libertarians is how they expect to have a country without tariffs? Secondly, I buy things with Gold and silver all the time, what the money is backed by isn’t the problem, the problem is what most people imagine an asset to be.

Humans still barter, and in a bartering system the most important factor is property rights and without borders, you can’t have laws and without laws, you can’t have property rights. So the major problem in society today is the size of government, it’s too big and the Fed. under Obama basically carried him through his 8 years, Obama was one of the worst presidents for the economy in the history of America, but he wasn’t as bad as FDR.

The Fed saved him, Trump has been the complete opposite, Trump is good for the economy a little too good, and had the Democrats not been standing in his way the last almost 2 years, most countries in the world would have had to cut government spending. Fortunately for the world economy, the Chinese Communist Party unleashed the coronavirus.

In economic terms the coronavirus is deflationary, but as China has learned, the Western World struggles to grow because of regulations and their growing dependence on China. This deflation leads to money printing, which allows China to position itself as the hero of the story.

Unfortunately for the Chinese Communist Party, they showed their hand too soon and although I’m not sure how their punishment will manifest, I suspect the debasement of currencies will pose a huge threat to made in china manufacturing.

So in short, the world is headed for deflation/debasement however, it’s almost a certainty that most governments are going to borrow a lot of money and add on more regulations which will serve as a temporary stimulant before the actual crash happens. At this point, I do think governments of the world are going to want the Fed. to do something at which time The Federal Reserve will be in a much better position to negotiate.

As I’ve been saying for years, any price manipulation the government is involved with, expect the prices of those items to rise sharply in the months ahead. As an example in prior years, the government stayed out of tech, well now the government is all over tech, instead of allowing Facebook and Youtube to eventually fail as they become more political, the governments of the world are regulating social media, this will have an inflationary effect.

In the real world of bartering, excluding government fiat dollars everything is deflating, scarcity is becoming normal, but in fiat money terms prices are rising because in order to get government money you have to jump through different government loopholes.

But ultimately the problem for governments globally will be the coming cash flow crisis, in Canada where I live, it’s already game over! It’s no longer a game of if, Canadians are starting to ask the question when! I personally think Trump would better handle the coming crash than Biden would, but either way Powell and the Fed. have taken a step back.

So let’s say Biden wins, starts raising taxes, adding regulations, green new deal and all the dumb shit Democrats do, Powell will allow Biden to dig his own grave. After all, it’s two old white guys trying to be President and if Biden dies or steps down, nobody likes Kamala Harris and Pence isn’t exactly liked either.

So when the crash happens, what I imagine would happen is the governments will come to the Fed. and because there’s no longer an inflation target, the Fed. can simply do what the Government asks it to do. Now, as many of us who invest in things like Gold know is that, Politicians are clueless and will usually ask the Fed. to do things, the Fed can’t legally do, and this is where things I imagine could get interesting!

Because maybe a law might get passed that changes the Federal Reserve act and for you, Trump supporters, don’t be surprised if Trump is the president that destroys the dollar! Nixon instead of cutting government spending took America off the Gold Standard! I rarely if ever hear about President Trump talking about cutting spending.

I’ve also heard Trump say several times that the Fed. could try negative interest rates. When faced with a crisis Trump appears to be the type of person who prefers the easy way out! The easy way out of the next financial crisis will be to change the Federal Reserve act!

My prediction is that if Trump wins in a landslide, America has 2 years of economic growth before the crash hits, if Trump wins narrowly, stagnant growth and if Biden wins narrowly or in a landslide there will be a deflationary crash met with Fed. Gov. borrowing a lot of money to bail out everything it can, which is going to accelerate deflation in the Mainstreet economy. Deflation in fiat terms will not happen, so get that thought out of your mind, deflation in commodity terms will happen. As an example, it might be cheaper for you to buy things exchanging gold or silver for fiat dollars than it would be to buy things by working, saving, or borrowing fiat dollars.

This will all lead to the world begging the Fed. to do something and it’s at this point where all bets are off!

Prepare yourselves accordingly!

What The Fed’s New Inflation Policy Means For Interest Rates | forbes.com

Interesting times ahead!