A Federal Reserve Induced Depression
Once again, the Federal Reserve is holding interest rates steady. What a mistake.
Our nation is facing a perfect financial storm that will affect the lives of our citizens for decades to come. Not since World War II, has an economy, such as in the United States, had to transition so dramatically.
After World War II, the U. S. moved from a war time footing to a peace time, private sector-controlled economy. Europe benefitted from the Marshall Plan which included very generous protections in terms of tariffs for Europe and the rest of the world at the expense of U.S. businesses. President Trump is successfully restoring that balance, almost 35 years after prior administrations should have restored free trade and tariff balance.
In 2025, the United States is once again in a massive transition from a government sector-controlled economy to a private sector-controlled economy. The U. S. economy with its $37 trillion in debt is strategically vulnerable to economic disaster. The ongoing deficits and high interest rates will only exacerbate the problem. We cannot, as a nation, continue to function, as we have since Clinton/Gingrich last balanced the budget.
Unfortunately, unlike at the end of World War II, the Federal Reserve is operating contrary to rational economic policy.
Monetary policy and fiscal policy must be consistently applied, or the economic outcomes will be unpredictable.
The Federal Reserve has been asking the wrong questions since 2008. They are solving the wrong problem.
Instead of trying to control inflation, the Fed should be asking why inflation is so low in light of records amounts of funding provided into the marketplace. Inflation, under normal economic models, should have been out of control, even worse than the 9% high during the early part of the Biden Administration.
With $2 trillion annual deficits, a complete COVID shutdown of the economy, supply chain disruptions, regulatory overreach for business development, and inflation should have been higher than 15% annually. The fact that inflation, while horrible, is not even worse should warn all at the Federal Reserve of the dangers of a deflationary spiral.
Quantitative easing for over 10 years is still being unwound. The Federal Reserve balance sheet is a disaster.
None of these scenarios foster an environment for an economic transition to the private sector. It is critical that if this transition is not made, the U. S. will not survive a sustained economic attack such as from the BRIC nations or any other forces that may come to pass.
One only needs to look at the impact that OPEC had in the early 1970’s when the U. S. became economically dependent upon OPEC for fueling our economy. The results included long gas lines, record high interest rates and unsustainable inflation.
At present, the transition back to the private sector is the only viable solution for the long term survival of our nation.
Fortunately, we have a President who understands the magnitude of the problem. Fiscal policy is starting to come under control although we have a very long way to go to turn the corner. DOGE is a step in the right direction.
The Federal Reserve, on the other hand, is unraveling the President’s plans with an unworkable policy towards interest rates.
Rates must come down immediately so that businesses can access the financial capital necessary to cost effectively manage the transition of our economy.
So far, the Fed has missed virtually every form of interest rate guidance that they have provided. Had a CEO of a publicly traded company missed the mark so often, the SEC would have interceded long ago.
Rather than monetary policy helping our economy, it is entirely possible that rational theories of monetary policy may have negative effects when irrationally applied. Deflationary pressures exist and the Federal Reserve is leading us right into that deflationary trap.
In my years in the U. S. Marine Corps Reserve as the Commanding Officer of Civil Affairs unit and with an expertise in economic warfare, I never imagined that the Federal Reserve would be operating to the detriment of our economy and our people. Once a deflationary spiral starts, it is virtually impossible to stop.
Deflation has devastating effects in every aspect of life. It destroys lives, opportunities, and hope of our great citizens.
The time to act is now. Alan Greenspan’s “The Age of Turbulence” will look calm in retrospect should the Federal Reserve not act now to reduce interest rates and facilitate the transition to a peace time and private sector-controlled economy.
Should the Fed fail to act, they will have caused an economic depression and deflationary spiral unlike anything we have ever seen.
Col. Frank Ryan, CPA, USMCR (Ret) and served in Iraq and briefly in Afghanistan and specializes in corporate restructuring and lectures on ethics for the state CPA societies. He has served on numerous boards of publicly traded and non-profit organizations. He can be reached at FRYAN1951@aol.com and twitter at @fryan1951.
