Posted November 11, 2019 08:24:47It’s been a week since the Federal Open Market Committee announced its interest-rate hike for November.
The decision is widely expected to raise the Fed’s benchmark interest rate by a quarter-point to 0.25%, and is seen as a major step toward restoring some of the economic health to the U.S. economy.
But what if the Fed did nothing at all?
It could happen.
There’s a growing sense that the Fed is deliberately keeping its rate at zero in order to keep inflation low, even as inflation rises and unemployment rises.
The problem is that this is not a new concept.
The Federal Reserve has repeatedly been forced to raise interest rates in the past to fight inflation.
It was in the early 1980s, in response to a huge spike in consumer spending, that the Federal Stabilization Fund (FSF) was created to help the Fed keep inflation under control.
Inflation had already been rising for years.
In fact, during that period, inflation was so high that the FSF was running out of money.
The Fed, in its efforts to stop inflation, began printing money to buy bonds and other assets, and it also started purchasing mortgage-backed securities and other financial assets, which was a key tool in its war against inflation.
But during this time, inflation went up, and the FFS ran out of reserves to buy mortgage-based securities.
So the Fed decided to use the Federal Funds Rate, which is the rate it pays to banks to borrow.
That rate is currently about 1.25%.
What if the Federal Central Bank was to stop printing money and instead spend it on a huge stimulus program, which would raise interest-rates and inflation?
If the Fed stopped printing money, and instead spent it on something else, it could lower interest rates, and thus cause inflation to rise.
What if interest rates started to rise when the FSLB started printing more money?
What if inflation were to fall when the Fed spent more money on stimulus?
What happens if the FSC started printing money instead of spending it?
What would happen to the value of the U, the U-S.
dollar, and its standard basket of currencies?
Inflation and the rate at which the FST funds are paid for would increase, and inflation would rise as well.
If the FSEB were to stop funding the FSM and instead stop paying interest on it, inflation would fall and the U would depreciate.
If interest rates start to rise as a result of a stimulus program like the FSB, interest rates would start to fall as well, and this would cause inflation and unemployment to rise even more.
Why would the Fed need to raise its rate even more?
The answer lies in the central bank’s interest-price-support mechanism, or the central banks’ ability to keep the money supply stable.
This is what the Fed does.
When it raises its benchmark interest rates (called the target rate), it sets up a buffer in the economy that acts as a reserve against inflation, so that inflation does not rise too quickly and unemployment does not fall too quickly.
In other words, the Fed keeps inflation low and unemployment low, while at the same time keeping interest rates low and interest rates rising.
The idea is that if prices for a basket of goods rise faster than wages, wages will rise faster too, which should keep inflation in check.
And if inflation falls, unemployment will fall, and unemployment should fall even more, so the FSR would be keeping the economy stable.
But if prices rise too fast, unemployment rises too quickly, and prices start to increase too fast for the Fed to keep interest rates down, then inflation will rise too rapidly, and interest costs will rise.
In this scenario, the FSS would be increasing the money stock too quickly to keep prices from falling too quickly so the Fed could continue to keep its target rate low.
The end result is that the economy gets less of the stimulus it needs to stay in a healthy state.
If we assume the FSP does the job, the economy will be able to keep on expanding even more quickly than it has been for a long time, and we will see inflation rise even faster.
In a way, the Federal government has just saved itself the trouble of having to go to the bank to raise money, since it has a buffer it can use to avoid inflation.
This buffer could also be used to avoid the problem of unemployment rising too fast in a recession.
It is not just the FSD that is supposed to keep monetary policy in check, either.
The central banks also have their own central banks, which are responsible for coordinating monetary policy across all the monetary authorities in the world.
Central banks can use their money to purchase assets and to make loans at very low interest rates to different countries in the global economy, and they can buy other assets from foreign countries.
Central bankers can also borrow money at very high rates and use it to buy assets