The Fed Does Not Care About You

When people talk about the Federal Reserve, it is often in terms that they view the institution as a person. A person cares about the future, or can care. A person can care about your welfare. The Federal Reserve does not care about you at all. Get used to that.

People look at Jerome Powell, the Chair of the Board of Governors of the Federal Reserve System, and they assume he is in charge. However, in most ways, he is not. The board has seven members. The slightly larger Federal Open Market Committee has these seven plus the head of the New York Fed and four of the 11 Reserve Bank presidents. These Reserve Banks are the Fed’s regional branches. Powell has a vote, but he easily could be in the minority.

The Fed believes it is doing the best for you. Today, that means raising rates rapidly. The most recent increase was 0.75%. The governors would argue they do not want you and your employers (unless you are retired) to have to deal with inflation. Their theory is that high-interest rates will cut economic activity, bringing down demand for goods and services, which brings down inflation. If that does not work for you, the Federal Reserve doesn’t care. It believes it works on behalf of the entire country, whether or not the entire country looks like you.

The Fed does not care if mortgage rates go up and you cannot buy a house. It does not care if car loan rates go up and you cannot buy a car. If you can’t buy a car, the economy may cool down. The car price may be better, but you may have been laid off because of the slower economy.

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The Fed does not care if you don’t have a job. The governors assume that for inflation to fall, jobless rates must go up. And it has to go up by a rate that will put millions of people out of work. Food may be less expensive, but you may be unable to afford it. In the Great Recession, as a frame of reference, the jobless rate reached 10%.

The Fed is not your friend. As the cruel corporate raider Gordon Gekko said in the film “Wall Street,” “If you want a friend, get a dog.”

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