The Federal Reserve is raising interest rates again this week to combat inflation. Its thinking, shared by most economists, is that only by slowing the economy and putting people out of work, can inflation be curbed.
This segment of What’s Ahead lays out why the Fed’s paradigm is profoundly mistaken and reveals our central bank’s disturbing misunderstanding of inflation. This way of thinking has led the Fed to believe it can gauge what the economy is capable of turning out in terms of products and services and whether its performance is sustainable or not. Based on these preposterous calculations, our central bank will try to stimulate or depress the economy.
Hubris doesn’t begin to describe such misbegotten—and destructive—arrogance.