I think the Fed could easily push interest rates much higher if they really wanted to. They have something on the order of $8T in assets that they could sell. I don't know how much they'd have to sell, but a trillion or two over the course of a few months would certainly do the trick.
Of course there's a small problem with this approach. The more they sold and the higher the rates went as a result, the lower the market value of their remaining assets would go, because virtually all their assets were purchased at lower rates. This would quickly destroy what little equity they have on their balance sheet and then they'd technically be insolvent, which would be an interesting situation.
In theory, the structure of the Federal Reserve means that if the Fed loses money from the assets on their balance sheet the member banks in the Federal Reserve districts have to make up the difference.
In reality, any such loss could (and probably would) be repackaged as yet another tainted asset to carry on the books until things got better.
We don't have to guess about the Fed's intentions regarding various forms of demand destruction, for they tell us flat out they want economic demand in this country destroyed: consumer demand for goods, labor demand for workers...they want it all gone. Because that's how you bring prices and inflation back down to Earth (according to Paul Volcker).
I think the Fed could easily push interest rates much higher if they really wanted to. They have something on the order of $8T in assets that they could sell. I don't know how much they'd have to sell, but a trillion or two over the course of a few months would certainly do the trick.
Of course there's a small problem with this approach. The more they sold and the higher the rates went as a result, the lower the market value of their remaining assets would go, because virtually all their assets were purchased at lower rates. This would quickly destroy what little equity they have on their balance sheet and then they'd technically be insolvent, which would be an interesting situation.
In theory, the structure of the Federal Reserve means that if the Fed loses money from the assets on their balance sheet the member banks in the Federal Reserve districts have to make up the difference.
In reality, any such loss could (and probably would) be repackaged as yet another tainted asset to carry on the books until things got better.
I heard a far greater unemployment rate was their desired aim. And we can figure out why.
Jobs destruction and reduced demand for labor is something the Fed openly seeks.
Jay Powell himself said so at Jackson Hole last August.
https://newsletter.allfactsmatter.us/p/powell-was-blunt-at-jackson-hole
He said so again after the July FOMC meeting.
https://newsletter.allfactsmatter.us/p/feckless-fed-is-destroying-demand
We don't have to guess about the Fed's intentions regarding various forms of demand destruction, for they tell us flat out they want economic demand in this country destroyed: consumer demand for goods, labor demand for workers...they want it all gone. Because that's how you bring prices and inflation back down to Earth (according to Paul Volcker).