Is It Time For The Fed To Start Talking About Hikes
Inflation Is Getting Worse
As more and more proof surfaces of the United States still being stuck in an inflationary economy, it becomes increasingly clear that the Federal Reserve may have no choice but to raise interest rates.
According to a report released by the Bureau of Labor Statistics on Tuesday, public and private sector employers saw their compensation costs increase by 1.2 percent in the first quarter. This represents an uptick from the previous quarter’s growth rate of 0.9 percent and is the largest increase since Q2 of 2022. If we extrapolate the Q1 gains over a year, the pace of compensation cost growth would be nearly 4.8 percent - more than double the average annualized rate of 2.2 percent seen in the decade leading up to the pandemic. Experts suggest that employment cost index (ECI) growth rates exceeding three percent are not aligned with the Fed’s two percent inflation target.
Analysts were once again surprised by the increase in employment expenses. Despite the narrative of a weakening job market where unemployment rises slowly, job opportunities decrease, and payment expenses stabilize, many still hold on to this belief.
The Job Market Is Becoming Too Hot To Handle
Despite what was expected, the numbers are pointing in a different direction. In January, the economy saw a boost of 256,000 new hires, followed by 270,000 in February and 303,000 in March. This averages out to 276,000, a significant increase from the previous three months which saw only 212,000 new hires on average.
The projected estimate for the April employment report is around 250,000 jobs. This would result in a three-month moving average of 274,000, which is still quite high. Unless there are revisions to previous months, any number above January's 256,000 would lead to an increase in the three-month average. According to Goldman Sachs, their forecast is for 275,000 jobs, which would pull the three-month average up to 283,000.
The Labor Market Has Undergone a Dramatic Change, Leading to an Increase in Inflation Rates.
This was not how things looked like they were going to go just a few months ago—at least in the view of establishment economists and Wall Street. While Breitbart Business Digest was warning that the economy was accelerating, the labor market was gaining steam, and inflation had stopped declining and was showing signs of reaccelerating, most economists had signed on to the “soft landing” thesis where inflation would come down without much damage to the labor market or growth. More
Should We “End The FED”?
Ron Paul, the former U.S. Congressman and presidential candidate, has been a vocal critic of the Federal Reserve (the Fed) for decades. His call to "End the Fed" stems from a deep-seated belief in free-market principles and a strict interpretation of the U.S. Constitution. Paul argues that the Fed's control over the money supply and interest rates constitutes a form of economic central planning that distorts market mechanisms, leads to boom-bust cycles, and erodes the purchasing power of the dollar through inflation.
Central to Paul's critique is the idea that the Fed operates with a lack of transparency and accountability, functioning as a "banker's bank" that bails out financial institutions at the expense of ordinary citizens.
He contends that such practices are not only economically damaging but also morally questionable, as they benefit the wealthy and well-connected at the cost of general economic stability and public trust.
Paul also highlights the constitutional angle, pointing out that the Constitution does not explicitly grant the federal government the authority to establish a central bank. He argues that sound money, preferably backed by gold or silver, would provide a more stable and equitable monetary system.
Ultimately, Ron Paul's advocacy for ending the Fed is rooted in his desire to return to what he sees as constitutionally supported and economically sound money policies that ensure greater economic stability, lower inflation, and a reduction in the power of a central financial authority.
Here Are Some of The Main Themes From The Book
Lack of Accountability and Transparency: Paul criticizes the Federal Reserve for operating with a significant lack of transparency and accountability to the public. He argues that this allows the Fed to make decisions that can profoundly impact the economy without sufficient oversight.
Economic Instability: According to Paul, the Federal Reserve's control over the money supply and interest rates leads to artificial booms and inevitable busts. He suggests that these cycles of economic expansion and contraction are exacerbated by the Fed's monetary policies, which distort the natural order of the market economy.
Inflation and Devaluation: Paul is particularly vocal about the role of the Fed in creating inflation, which he views as a hidden tax that erodes the value of money. He claims that the Fed's ability to print money at will leads to a continuous devaluation of currency, harming consumers and savers.
Constitutional Concerns: Ron Paul argues that the Federal Reserve is not constitutionally sanctioned. He points out that the Constitution does not explicitly authorize the creation of a central bank and argues for a return to a monetary system directly supported by the gold or silver standard, as was more common in the early history of the United States.
Moral Hazard: The book discusses how the Fed creates moral hazards by bailing out financial institutions and other large corporations. Paul argues that this encourages risky business behaviors that would not be viable without government backing, ultimately leading to bigger systemic problems in the economy.
Loss of Personal Liberty: Paul connects the issue of monetary policy to personal freedom, arguing that the Fed's policies restrict economic liberty by centralizing financial power and limiting individuals' ability to make economic decisions free from government manipulation.
