Interest rates

The Trump White House took a victory lap on Monday, declaring in its newsletter that the American economy is back – back bigger and better than ever. Core inflation is down. Industrial production is up. Claims for unemployment dropped. Tariff revenue rose. The newsletter even cites the Wall Street Journal—otherwise in bad odor in the Trump White House – for decreeing that the American economy is “regaining its swagger.” Is it time to splurge on a fancy vacation? As it happens, I’m currently visiting Vermont where the number of tourists is distinctly lower than in previous years.

Powell pays for past mistakes In the summer of 2020, Fed chair Jerome Powell could not have been clearer. “We’re not thinking about raising rates,” said Powell, before doubling down: “We’re not even thinking about thinking about raising rates.”   Things, as we now know, turned out a little differently. The months marched on, and with the Biden administration determined to spend, spend, spend, inflation went from “high class problem” to “transitory” to the biggest problem facing the US economy. Powell and his Fed colleagues went from not thinking about thinking about raising rates to, well, raising rates. From virtually zero around this time last year to 4.75 percent as of January.

After a bank run on Silicon Valley Bank left the institution in ruins, the Federal Reserve announced it would make whole the bank’s customers, including those with uninsured deposits in excess of $250,000, which should have made them ineligible for the Deposit Insurance Fund. President Biden promised the American people that this was not a bailout because no losses would be borne by taxpayers — a claim the Wall Street Journal assessed as a “whopper.” But the debate we should be having is not over the definition of the authorities' actions, but how to judge them morally — especially given how the Fed has been trying to tame inflation for the past two years.