The Gods Have Now Officially Driven Them Mad
June 15, 2022 (EIRNS)—The statement of the Federal Open Market Committee today, “explaining” its decision to raise the Federal Funds rate by 0.75% both today and again at its July meeting, began with a clear falsehood—deliberate lie, or do they not know what their own economists are measuring? The statement began: “Overall economic activity appears to have picked up after edging down in the first quarter.”
On the same day, the Atlanta Federal Reserve Bank reduced its running estimate of second-quarter U.S. economic growth from 0.9% most recently, to zero. Why? It said “the nowcasts [you should excuse the Newspeak] of second quarter real personal consumption expenditure growth, real growth, private domestic investment growth, and real government spending growth decreased from 3.7% to 2.6%, from −8.5% to −9.2%, and [from] 1.3% to 0.9% respectively.” Note in particular the second factor: Business capital investment, already strongly negative and dragging the GDP track down, is becoming more negative as the Atlanta Fed staff tracks it. The FOMC’s rate increases will decrease it further. It said it aims to have the Fed Funds rate at 4% by 2023.
The FOMC statement went on, of course, to blame inflation on Russia’s alleged attacking Ukraine, and then on China’s COVID-19 lockdowns. This state of dissociation extended into Chair Jerome Powell’s press conference, where among other things he claimed that consumers’ impression of high inflation come from news headlines, because the poor folks don’t look at “core inflation” as he does. And then he said, “There’s a role for us in moderating demand,” when demand for everything from housing to groceries is already clearly falling.
President Biden, who’s now having a fling at blaming inflation on oil companies, publicized a letter he sent to refinery firms, threatening to somehow force them to refine more products. This is a fantasy, but he added a dangerous falsehood: “I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office. But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable.”