by ReDDisko
We are now approaching the point where a new commitment may no longer be possible. As a result of the recession and the ensuing financial crisis, the Fed will no longer be able to target inflation and will be forced to lower interest rates and start buying assets from the market. More precisely, the Fed could continue to target inflation, but only at the cost of a collapse of the banking system and a massive decline in the real economy.
Although, as we can see, the state apparatus is clearly against it and continues to keep the economy afloat at the expense of a budget deficit of 7-8% of GDP. And it is unclear what can or should change in their approach. They created the inflationary wave and are still supporting it. Moreover, they will be the first to rush to the rescue of all the drowning, handing out money left and right. Yes, maybe not right away, after all, the fallen assets will be picked up, but they will do it anyway.
Moreover, the whole world will ask them to lower the interest rate and save the banks and other actors, because at that point it will be even worse for them. Only the consequence of such a bailout will be a further increase in inflation at a low rate.
In general, the next commitment (first – the gold peg completed in 1971, second – real negative interest rates since 2009, third – 2% inflation) will finally be broken (not counting the already completed period of high inflation in 2021-2022) and, of course, it will have consequences for the reserve status of the dollar, in addition to those mentioned above.
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