Fair Warning. . .

(Fair Warning. . .)

One can classify government spending into two categories: "fiscal," which focuses on government spending and "monetary," where the Federal Reserve monitors and adjusts interest rates, up or down, to combat inflation that results from fiscal outlays. The current round of inflation was caused by all the "green" spending of the Biden Administration, worth trillions of dollars. Inflation peaked at 9.1% a couple of years ago.

To combat this rise in prices, interest rates get progressively raised, the economy slows, and inflation is supposed to moderate. Over the previous quarters, inflation has come down. Not to the Fed desired 2% and prices are still expensive, but the consensus has been that the Fed would finally cut rates, a quarter point (25 basis points).

However, when the Fed decision was announced, it was a half point (50 basis points) cut. There were some who could not justify a quarter point cut much less a half point. As this action was somewhat un-expected, Wall Street is having a good day, all Averages up 1% or better. That being said, the timing seems suspicious.

Like the Supreme Court, the Federal Reserve is supposed to be apolitical. Also, like the Supreme Court, that is no longer possible. Governors in the Federal Open Market Committee are constantly looking at economic data and their view could be more complex There are always "headline" numbers and then come "revisions." If one can recall, close to a million fewer jobs were actually created. Other recent job reports have also proven anemic and the unemployment rate stands at 4.2%. What had it been when Trump left Office ?

Then, are things not as they seem ? Are things worse ? A quarter point cut had already been factored. But a half point. That is a statement. It says that there could be weakness in the economy and the measure taken by the Fed reflects their feelings on the economy. And, as it happens. such a cut and the timing to boost performance which should benefit Vice President Harris. It remains to be seen whether the adjustment was made in time to affect the Election.

It is being said that former President Trump brings a lot of the vitriol against him is self-inflected. The same thing can be said of the Federal Reserve. They could have appeared im-partial if the cut was announced after November 5th. But the Fed had acted now. It acted beyond what was expected. The only conclusion one can draw is that there could be some ulterior motive. What could that possibly be ?