We all remember it. For more than two years, every single person in the United States was subjected to the exasperating melodrama known as Dr. Anthony Fauci.
A career bureaucrat who headed the National Institute of Allergy and Infectious Disease, Fauci hypnotized much of the country and convinced people that he was the second coming of Joan of Arc– a saintly, righteous holy warrior who would lead everyone to victory. Except his sword and shield were “science”.
We never heard the end of it. Fauci claimed that he was “following the science” about social distancing, mask mandates, vaccines, school closures, and more.
And rather than accept criticism and debate about his ideas (which is the very foundation of science), Fauci continued to insist that he had all the answers. In one of his most eye-rolling assertions, he even said at one point that any criticism of him was “dangerous. . . because I represent science”.
Of course, truth has a wonderful habit of eventually coming to light. It cannot be buried forever. And according to unearthed records we know now that much of this “science” was just made up.
For example, Fauci himself appeared recently before a Congressional panel and was forced to admit under oath that his 6-foot social distancing rule “sort of just appeared”, which strikes me as extremely unscientific.
It appears now that the Federal Reserve is following the example of Dr. Fauci. And as I was watching the Fed’s press conference yesterday after their decision to do absolutely nothing, I couldn’t help but see the similarities.
Instead of “science”, the Fed now makes repeated claims that they are ‘following the data’, as if the Labor Department’s inflation reports are some sort of magical fairy leading us to a soft landing.
According to this magical fairy, there is still not yet enough confidence “that inflation is moving sustainably toward 2%”. But apparently the magical fairy thinks that there will be enough confidence next month, so the Fed has all but promised a September rate cut.
Frankly, it all sounds made up to me.
Remember the Fed’s track record? They conjured trillions of dollars out of thin air during the pandemic and failed to predict any inflationary consequences. And when inflation did appear, they ignored it and even went as far as to gaslight anyone who asked them about it.
Eventually, when they could no longer ignore inflation, they insisted that it was “transitory”. And when they stopped calling in transitory, they still waited until inflation was more than 6% before they finally did something about it.
Best of all, the Fed then failed to predict any consequences from their rapid interest rate hikes.
Well, one obvious consequence that the Fed should have known about is that jacking up interest rates causes bond prices to fall. This is basic finance– bond prices and interest rates move in opposite directions. Even a first-day intern at the Fed knows this.
And guess who owns massive quantities of bonds? Commercial banks… including Silicon Valley Bank.
You probably remember what happened in 2023: the Fed’s interest rate hikes triggered major losses in Silicon Valley Bank’s bond portfolio, rendering the bank completely insolvent.
Yet literally TWO DAYS before Silicon Valley Bank collapsed, the Fed chairman told Congress that “nothing in the data” showed any consequences from their interest rate hikes. That’s some magical fairy.
The irony is that one of the Federal Reserve’s key responsibilities is to supervise and regulate the banking system… which means that Silicon Valley Bank sent regular reports to the Fed showing that they were in deep trouble.
In other words, “the data” proved very clearly that there were serious problems in the banking system. But the Fed still didn’t notice.
So now we’re supposed to take comfort in the fact that the Fed is “carefully assessing incoming data”. Well, that’s what they’ve theoretically been doing for the past several years. But they’ve gotten it wrong over and over again.
It’s worth pointing out that “the data” is a very limited set, and the Fed has its “preferred” metrics to measure economic activity. For example, the Fed favors the Personal Consumption Expenditures index as an inflation gauge, over the Consumer Price Index.
Cherry-picking one set of data over another and shutting yourself off from a much wider body of evidence, is another reminder of failed, pandemic-era decision making.
And the Fed seems to be deliberately ignoring some of the biggest economic drivers of all.
Earlier this week, as the Fed locked itself in a room with its magical fairy, the US national debt passed $35 trillion.
The national debt (and by consequence the US budget deficit) is a CRITICAL economic factor that should be keeping the Fed up at night. Continued deficit spending will be very inflationary and make it virtually impossible for the Fed to succeed in its mission.
But there was ZERO discussion of the debt yesterday. Apparently, the magical fairy doesn’t care about such things.
A few reporters asked about the upcoming Presidential election and whether or not the Fed was modeling any potential policy changes depending on the outcome.
But the Fed Chairman was almost proud of his ignorance and insisted that they were non-partisan, and that the election outcome didn’t factor into their planning.
Come again?!?! Are these people so naive to think that there will be no difference in the economic policies of Kamala Harris versus Donald Trump?
Imagine if Bernie Sanders and AOC were running, and promised to default on the national debt, enact Medicare-for-All, provide free college tuition to everyone, forgive student debt, guarantee government jobs, and impose a $50 national minimum wage.
Would the Fed still claim indifference and insist that Fed policy would be unaffected by the election outcome?
It is so utterly bizarre that the Fed willfully ignores some of the most consequential economic drivers of our time… yet simultaneously insists they are ‘following the data’. It’s almost like Fauci is back in charge.
