The Federal Reserve’s ability to maintain economic stability is increasingly critical as we face various obstacles. Investors, who have never experienced a self-induced recession, question the Fed’s capacity for decisive action. However, the central bank has consistently signalled its intention to curb inflation by slowing down the economy.
One example of this is the banks that did not adequately prepare for rapidly rising rates, leading to policy tightening that weakened their cash positions and balance sheets.
Despite worsening economic conditions, as evidenced by recent employment data, the Fed must persist in raising interest rates to prevent a downward spiral predicted by numerous pessimists. The debt ceiling stalemate, weekly bank collapses, and the weakening dollar have gold and cryptocurrency enthusiasts watching closely, concerned about the possibility of stagflation.
Allowing inflation to take hold could mark the beginning of the end for American prosperity. Uncontrolled debt spending has long been a concern, and the idea that empires do not last forever is rooted in historical fact.
With inflation plateauing just below 5%, the latest PCE data suggests that it is no longer decreasing significantly. The typically dramatic debt ceiling debate now threatens to lead to a complete breakdown of political functionality.
The solution is clear: raise the debt ceiling and continue doing so indefinitely, as long as inflation is controlled. Whether it involves minting a trillion-dollar coin or implementing other measures, the focus should remain on preserving the purchasing power and dominance of the world’s reserve currency.
In this struggle, Jerome Powell has the tools necessary to stabilise the system for the long term, even if it means causing short-term pain. Speculators are buying assets at any price in the hope that the Fed chair will capitulate to protect his short-term reputation. Despite their attempts to create dark narratives about the future, the economy has shown remarkable resilience over the past three years.
The latest ISM data, which indicates contracting topline growth and rising prices, bears a striking resemblance to stagflation. Allowing this situation to worsen could vindicate the doomsayers and put the American model at risk. As the dollar’s potential demise looms, Russia, China, and cryptocurrency enthusiasts eagerly anticipate the opportunity to promote their alternatives.
Powell must stand firm in the face of these challenges. As a crucial Fed chair in modern history, he has the responsibility to raise rates and remain steadfast, ensuring the stability of the economy for the long term.