So the Federal Government has let the cat out of the bag as to why they are so inept at using the Fed as an arm of the Federal Government to manage inflation and unemployment. They seem to be under the simplistic assumption that those are both managed through use of the banking system and control of the Fed Funds Rate.
On the San Francisco Feds website under education they have a game you can play that will allow you to gain insight into their massively complex world. What a joke but probably more true than we would like to think. Here is the "educational" link. Fed Chairman Game If you then go to the New York Feds website and get the history of the fed funds rate for the past 4 years you can play the game with the benefit of all their wisdom during the past four years. History of Fed Fund Rates I downloaded that history and found we have been at a targeted rate of .25% for almost 3 years. We have had a .25% fed funds rate since December 18, 2008 or nearly 3 years now and in the year preceding that they were dropping it like crazy from 4.5% to .25% in a futile attempt to gain control of the economy with the mistaken impression that they do control it through their monetary policy. Never mind government spending, consumer confidence, demographics of 300 million people in a world of 6 billion, all they have to do is play with some interest rates and they can take control.
I then played the game with a 0% fed funds rate for 4 years which is the limit of the games model time periods and we were at 1.5% unemployment and 27.88% inflation. I then went back and put in .25% for the entire 4 years and came to the same 1.5% unemployment but inflation after 3 years, which is where we are right now, was 23.21% and after 4 years of the policies we are now following the inflation rate was 38.75%.
Well we know they exclude food and energy from the CPI now and I can tell you that I have observed very high inflation in food prices. Probably something to do with raising corn for ethanol rather than food or some other absurd government policies from the departments of energy or agriculture. We don't know the real rate of inflation or the real rate of unemployment, but I can tell you we are not being told the truth in either case. I believe unemployment is much closer to 20% if you consider all the under employed and those who have just given up. As for inflation, I have no idea what the real number is, but I am confident the published numbers are materially inaccurate. Thus according to the feds own modeling we should have 1.5% unemployment and 38.75% inflation by this time next year. I will not be surprised if they are half right (the inflation projection) but we will never know based upon official statistics because they are not honest in that reporting. And if this "educational" web site is any indication of their modeling abilities it is no wonder why we are floundering with no idea how to fix America's problems let alone the worlds problems.
Buckle up America, this is going to be a rough ride to the bottom
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