Throughout the last decade, the world has seen its fair share of geopolitical tensions and a growing sense of civil unrest, yet one thing remains consistent. Even in a United States that has been devastated by a simultaneous health crisis, economic collapse, and wave of mass protests across the country, the markets keep climbing. And for as long as the Federal Reserve continues to push liquidity into our financial system, this trend will build on itself. Of course, that is, until it all comes tumbling down in a mess of devalued currency and drastically reduced financial stability for the majority of Americans.
Another theme that has persisted in recent history is that prices have remained steady, even in the face of unprecedented asset price inflation. Meanwhile, the Fed has actually been attempting to set widespread inflation in motion as a way to cut down on the trillions of dollars of debt that have been rapidly added to the balance sheet in the first six months of this year.
Despite their efforts, the Fed has failed to achieve their inflation targets. In fact, deflation is now tied inextricably to the Fed’s ill-advised monetary policies. The lower yields go, the less consumers want to spend. This means that the more the Fed pushes to ignite inflation, the more we will see Americans across the board putting any money they can spare into savings. Ironically, these federal attempts to encourage inflation have actually turned out to be remarkably successful at the opposite–driving deflation.
Ultimately, the Fed’s quantitative easing (QE) and negative interest rate policy (NIRP) have hurt more than helped the state of the current crisis. Furthermore, their actions have led to the creation of an enormous asset price bubble.
Clearly, we need a better way to get money to consumers as efficiently as possible. According to two former central bank officials–head of the Federal Reserve Bank of New York’s markets group Simon Potter and economist for the Fed’s Board of Governors Julia Coronado–the solution is a monetary tool termed recession insurance bonds. This tool would utilize digital applications to wire emergency aid payments directly to Americans in need.
Coronado said that the Fed would receive a portion of the country’s GDP to dedicate towards consumers, dividing the sum equally among households in the event of a recession. Digging the US deeper into a hole is a spike in civil unrest across the country as states and local areas alike grapple with the restructuring of their police departments after weeks of protests.
Americans have banded together to demand the defunding of police, and their complaints have been put into action in a growing number of major cities. This comes at a time of skyrocketing crime rates and deep societal tensions that have surfaced in extreme ways as people take to the streets. Some areas have looked into the possibility of shutting down police departments entirely.
According to a report by the Police Executive Research Forum, almost 50 percent of the 258 law enforcement agencies surveyed said that their funding has already been cut or that there are plans in the works to reduce budgets.
A high-ranking Fed official, Minneapolis Federal Reserve Bank president Neel Kashkari, recently offered some advice for the country. According to Kashkari, an additional 4 to 6 week total lockdown is just the thing the US needs to give its flagging economy a boost.
Without it, he argued that the health crisis could continue to drag down any form of recovery well into 2022. Kashkari predicted further waves of business closures and economic strife if the pandemic is not brought under control. As usual, this proposal came with calls for additional aid from Congress to the American public, with claims that the government definitely has the resources to do so.
Of course, operating under the belief that you can print your way to prosperity, things are looking just fine for the United States. For those of us that have woken up to the reality of the current crisis, we’ll strap in and wait for the worse economic collapse that is yet to come.
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