Why The Fed Interest Rate Drop Matters To YOU | Facts Ep. 17
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When you're slowing the economy, you're trying to put people out of work. That's your job, is it not? My duty is to achieve maximum employment and stable prices, and to supervise and regulate banks. Can the president fire you? No.

Every single quarter, the financial world waits with bated breath to see what the Federal Reserve will do. And today, Federal Reserve Chairman Jerome Powell announced the Fed's newest decision on setting the so-called federal funds rate, the interest rates we hear about so much in the media. Banks wait on it. Investors wait on it. Businesses wait on it. And thus, consumers wait on it. This means that in reality, the global economy is controlled not by businesses or corporations or even legislatures, but by the Fed.

It's controlled by a select few central bank pseudo-experts who decide whether your products ought to be more or less expensive, whether your savings ought to be decreased or increased in value, and whether, in the end, you ought to keep your job or lose it. When you're slowing the economy, you're trying to put people out of work. That's your job, is it not? The Federal Reserve has a dual mandate. Keep inflation low, the Federal Reserve targets a 2% annual rate, and unemployment low.

The Federal Reserve engages in so-called monetary policy. This is all about the amount of money and credit in circulation. As a central bank, we have the ability to create money digitally. And we do that by buying treasury bills or bonds or other government-guaranteed securities and actually increases the money supply.

But things weren't always this way. Before the 1930s, America and many other countries around the world utilized a gold standard for their currency. A gold standard is a monetary value outside the manipulation of any centralized government. This meant Americans could convert their dollars to gold at a fixed value.

Under the gold standard, only fiscal policy mattered, and this was something that legislatures were responsible for. There was no Jerome Powell to determine how much your money ought to be worth on any given day, or what the rates of interest were on a 30-year mortgage. Instead, it was left to elected officials to determine whether to suck money out of the private sector through taxation, or to inject more money into the private sector through tax cuts, whether to regulate the economy, or whether to unleash it more broadly, whether to run up debt, or whether to pay it off.

Because elected officials were held responsible for the state of the economy, members of both parties did have an interest in some semblance of fiscal responsibility. Do you think gold is money? No. It's not money. Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law. From 1870 to 1931, the era of the international gold standard prevailed, with a break for World War I.

Except for the Civil War period and its immediate aftermath, the U.S. national debt was solidly below 10% of GDP nearly the entire period between 1800 and World War I.

Even after World War I, the national debt dropped back down as a percentage of GDP below 20%. But in the wake of the Great Depression, which was thought to have been caused in part by adherence to a gold standard, FDR and the U.S. Congress finally removed the United States from the standard in 1933. We're losing no time in getting the government's vast work relief program underway. During FDR's spending bid of the 1930s,

Unparalleled in world history, America's debt rose to above 40% of GDP. But then, after World War II, it dropped down closer to 20% again.

In the 1960s, LBJ blew out the spending. He tried to raise taxes to compensate. By the early 1970s, America's economy was in shambles. We must protect the position of the American dollar as a pillar of monetary stability around the world. In 1971, Richard Nixon removed the United States from the so-called Bretton Woods system, designed to establish convertibility of foreign currency into U.S. dollars. Your dollar will be worth just as much tomorrow as it is today.

The effect of this action will be to stabilize the dollar.

Now, all currency is free-floating. American dollars are based not on the value of gold, but on the value of the full faith and credit of the United States. Every time you use dollars as a reserve currency, you're basically just betting that America will pay back its debts eventually. Now is the point in history when the Federal Reserve becomes the single most important factor in the global economy. The U.S. dollar is the widely accepted and really the only serious candidate for the world's principal reserve currency.

Because America is still the best bet on the global block, politicians can freely take out debt. They don't have to worry about repaying it in gold because dollars aren't convertible into gold anymore. There is an infinite amount of cash at the Federal Reserve. We will do whatever we need to do to make sure that there's enough cash in the banking system.

Folks, the best way to achieve peace in the Middle East is through victory. And it turns out that the best way to achieve economic prosperity is peace, which is why a Harris administration is likely going to be a disaster for your finances. We are now looking at a proposed top income tax rate under Kamala Harris of nearly 40%, a 7% hike in corporate taxes, and a capital gains tax on unrealized gains, unconstitutional and insane. But wait, there's more. Kamala Harris would love to add almost $2 trillion to her already staggering $2 trillion deficit.

It's like they're trying to speed run the collapse of our economy. Now, I know what you're thinking, which is, Ben, how can I protect my money? Well, again, this is where our friends at Birch Gold Group come in. Birch Gold can help you convert your existing IRA or 401k into a gold IRA. That's correct. A tax-sheltered, inflation-resistant, golden ticket to financial security. Here's the kicker. You don't pay a penny out of pocket for the conversion.

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text ben to 98 98 98 to claim your eligibility before september 30th in the time of high taxes and high inflation protect your savings with gold from birch gold text ben to 98 98 98 today for your free info kit during strong economic times say 1980 to 2007 the growth of gdp makes up for the increase in debt but then when the economy tanks as it did during the great recession we start taking out more and more debt the market is not functioning properly there has been a widespread loss of confidence

And major sectors of America's financial system are at risk of shutting down. The irony here couldn't be greater. A small government free market conservative using what could be his last primetime speech to plead for two things he's always hated. Massive intervention in the economy and a huge new pile of taxpayer debt. And then when COVID hits, we take out even more debt.

And it's up to the Federal Reserve to help control the effects of such fiscal irresponsibility. America's national debt has topped $33 trillion. This is unsustainable. We borrow and we borrow and we borrow. Somehow we have to come up with that money. The United States can pay any debt it has because we can always print money to do that. As legislators abdicate their economic responsibilities, as they opt to kick the can down the road over and over and over again, central banks have picked up the slap.

Thus, Jerome Powell and his colleagues now run the world. Central banks have been tasked with using new tools, including interest rates below zero, and fixing the economy all without preventing economies from taking out more debt. As Mohamed El-Erian wrote in 2013, "Over the last few years, the central banks of the largest advanced economies have assumed a quasi-dominant policymaking position."

Governments that once resented central banks' power are now happy to have them compensate for their own economic governance shortfall. It's not just the United States where central banks rule the roost. It's true in Europe, in China, in South America. When lack of fiscal discipline becomes the rule of the day, it's left to the monetary policymakers to make up the ground. And those monetary policymakers are eminently political,

Take, for example, the current Treasury Secretary Janet Yellen. When I said that inflation would be transitory, what I was not anticipating was a scenario in which we would... She was made Federal Reserve Chair by Barack Obama. She'd previously joined the Federal Reserve Board under Bill Clinton. She was always considered an advocate of loose money. Unsurprisingly, as Federal Reserve Chair, she kept the money flowing.

Or take Jerome Powell. Powell was originally nominated to the Federal Reserve Board by Barack Obama. He was made head of the Federal Reserve by President Trump. He's strong. He's committed. He's smart. He is a registered Republican with a history in the private sector, and he has been historically skeptical of loose monetary policy. Nonetheless, under political pressure, he placed interest rates at record lows during COVID and its aftermath, creating one of the greatest asset bubbles of all time.

The Federal Reserve, like all other central banks, is in fact a political body. Pressure works. FDR essentially sidelined the Federal Reserve entirely. He let his Treasury Department run the monetary show. Harry Truman tried to put pressure on Fed Chairman Thomas McCabe. Richard Nixon infamously pressured Federal Reserve Chair Arthur Burns to loosen up on monetary policy to boost the economy ahead of the 1972 election.

But we ought to reserve politics for the electoral sphere, where mistakes can be punished by voters. None of the members of the Federal Reserve Board are elected. Can the president fire you? Well, the law is clear that I have a four-year term and I fully intend to serve it. So no, in your view? No.

Politicians now have the ability to endlessly and mindlessly destroy economic value, all while expecting the central bankers to pick up the pieces. And that's why investors wait for the auguries in Jackson Hole, as though they're watching for white smoke emerging from a papal enclave. It's the central banker's world. We're all just living in it.