The Fed Hates Unemployed People

The Fed is the one institution in America that is specifically responsible for centrally planning our economy by controlling the supply of money, the price of money (interest rates), and the inflation rate.  Although the press and the textbooks commonly say that its “dual mandate” is to keep both inflation and unemployment low, its actual charter and mission statement is mostly about stabilizing bank profits and that is the job that it really takes seriously.  The Fed has never really cared about reducing unemployment unless it thinks that lowering unemployment would help bank profits… Until last December.  Then for the first time in history, the Fed announced that it would target lowering the unemployment rate!  But it soon started backpedaling.  The initial announcement on December 12 had a goal of lowering unemployment to 6.5%, but a little over a month later, the Fed scaled back its goal to 7%.  Immediately the stock market declined at what investors seemed to see as bad news for growth.  Recently, the Fed has announced further “tapering” of its goals and the results have been disastrous.  Brad Delong calls it, “The Largest and Most Rapid Contractionary Shift since 1981.”  The 1981 monetary contraction caused the steepest recession since the Great Depression.  Delong graphs what it is doing to real interest rates to illustrate the severity of the Fed’s actions:

The Fed’s own plans say that it expects to fail at both of its “dual mandate” goals.  Despite its projected failure, the Fed announced that it is “tapering” its efforts to meet its own goals!  That is like a doctor who says that your treatment is too small to cure you so he will reduce the treatment and prolong your agony. That sort of planned failure would get you fired from most jobs, unless your real boss had another goal for you.  There is probably a lot of political (organizational) disfunction there, but some of that disfunction is caused by the fact that the Fed’s main (hidden-in-plain-sight) mandate is to do what the big banks want.