FED changes its stance on inflation

[Nic S.]

The FED announced today it will change its thinking when it come to inflation. They will be looking to “average” 2% inflation rather than force it by raising and lowering rates. They’ll stop relaying so heavily on unemployment numbers as an indicator as when to raise rates.

You can read more here: https://www.nytimes.com/2020/08/27/business/economy/federal-reserve-inflation-jerome-powell.amp.html

Apparently this will keep interest rates low for another 5-10 years and the housing crash so many predicted may not happen. What do you think?

[Taylor L.]

I think they come up with a conclusion then backfill data and stats. The conclusion is rates have to stay low or the whole house of cards is going down. If the Fed raises their rates then rates across the board may come up, including rates at which the US' national debt is financed. Eventually we won't be able to pay the yearly interest on our national debt, which is when the real monetary problems will start.

I just had a conversation yesterday with Russell Grey from the Real Estate Guys about this. Central Banks are stuck. The financial system and monetary system cannot withstand raising rates. Just prior to Covid the Fed was already looking at lowering rates, and that was before the 33% drop in GDP in Q2!

Reserve Currency status has been very good for the US and USD since Breton Woods. When that goes, we're in for trouble.