MSN: Federal Reserve Chair Jerome Powell had a message for Congress in his testimony Wednesday before the Joint Economic Committee: The Fed won’t be able to fight the next recession all by itself — it’s going to need help from Congress.
Powell is undoubtedly correct that fiscal policy will have to play a major role in any response to the next economic crisis. But he should also be realistic about what it can achieve. The Fed will also need a better monetary framework.
There is no escaping the fact that unless the U.S.’s economic conditions change substantially, the Fed will not be able to cut interest rates enough to significantly mitigate (let alone turn around) a major recession. As Powell noted, during a downturn the Fed has historically cut interest rates by about five percentage points. Currently interest rates are at 1.75%.
While it’s technically possible for them to go below zero, doing so causes significant problems in the financial sector and the Fed has all but ruled out the possibility. more …
Opinion: Finally, what we have been warning about since October 3, 2018 is out in the open. You see, it was then that Fed Chairman Powell announced that interest rates would go up 3-4 times in the coming year. And it was then that the stock market began a 20% decline until Powell reversed course and started lowering interest rates.
And it was on October 9, 2019 that Powell made this headline:
Fed Chair Powell Announces QE4… But “Don’t Call It QE4”
Quantitative Easing (QE1), money printing, first began in 2009 as a remedy for a recession so deep that it appeared to the world that a depression was unavoidable. Drastic measures were necessary and we were assured once the recession was over the Fed would raise interest rates and pay off the debt QE caused.
Of course what followed instead was QE2 and QE3, and the $4 trillion in debt that was created was never paid off.
Today, the debt is so large that paying it off is not even discussed. What differentiates QE4 from QE1 (2009) is that the US economy is growing, and stocks are at record highs. Under normal circumstances worry would shift to inflation and the Fed would be raising interest rates.
So the Federal Reserve along with the European Central bank (ECB) and the Bank of Japan (BOJ) are stuck. If/when a recession hits, the central banks will not be able to cut rates enough to stimulate the global economy.
There is no way to tell how long this vicious cycle can go on before one or more currencies of the major global powers collapses, causing a need for a global financial reset and a new world financial order.
What we do know is that our Bibles tell us one is coming; a person will have to work an entire day to have enough money to buy food for the day.
Third Seal: Scarcity on Earth
5 When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand. 6 And I heard a voice in the midst of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not harm the oil and the wine.” Revelation 6:5-6