Economic Storm Clouds Gather, but Ending the Fed Provides Hope

Eventually the combination of a spendthrift Congress and a print-happy central bank will cause a major economic crisis

The Federal Reserve recently increased interest rates to 1.75 percent. This is the highest interest rates have been since 2008, but it still leaves rates at historic lows. While the Fed says economic growth justifies future rate increases, an honest examination of the economy suggests that future rate increases are unlikely.

The Fed’s claim that the economy is strong is based on misleading government statistics. For example, the official unemployment rate understates true unemployment by not counting those who have given up looking for work. According to John Williams of Shadow Government Statistics, the real unemployment rate is above 20 percent. Government figures also understate the rate of inflation by pretending that you are not negatively impacted by inflation if you can still buy hamburger when you cannot afford steak. Shadow Stats estimates that the real rate of inflation is as much as four times higher than the official rate.

President Trump’s tariffs will further weaken the economy. While export-driven industries, including manufacturers that rely on imported materials, will be particularly hard-hit, the tariffs combined with the inevitable retaliation from other counties will impact all sectors of the economy. A global trade war could also lead other countries to stop buying US debt instruments, increasing pressure on the Fed to keep rates low.

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