Everything is up for review. “There’s a taskforce for that,” he said. Dot plot, possibly the last one, turns hawkish.
By Wolf Richter for WOLF STREET.
Kevin Warsh presided over his first FOMC meeting as Fed Chair – participants voted unanimously to keep policy rates unchanged at 3.5%-3.75% – but already there was the beginning of “regime change.”
- The statement was sparse: one paragraph each on the vote, the economy, and inflation. Gone was the “easing bias” that had been in prior statements, or any trace of “forward guidance.”
- The Implementation Notes put the Reserve Management Purchases of T-bills possible on hold, switching the language to an “when appropriate” basis from an “increase…” basis in the prior Notes.
- Warsh kneecapped the Dot Plot by not submitting his own projections: 18 participants instead of 19. But 9 of those 18 participants see at least one rate hike this year.
- “We dropped forward guidance,” he said at the press conference.
- Everything is up for review. “There is a taskforce for that,” he said multiple times. He proposed five taskforces: on the balance sheet size and composition; on Fed communications (“forward guidance”); on the inflation complex; the reliance on existing unreliable data sources; and productivity and jobs in the era of AI.
- “We made some changes today, I expect more changes to come,” he said.
Warsh had called for “regime change” at the Fed during the Senate Banking Committee confirmation hearing in April: Its operations and communications needed to be overhauled; less interventions in the financial markets; a smaller balance sheet; less communications and forward guidance; and fewer speeches over policy differences. He was critical specifically of the “dot plot” and other forms of “forward guidance.”
Last year, Warsh had argued that rate cuts were needed. But in the interim, things have changed: sharply accelerating inflation – driven by gasoline, electricity, and supercore services – and a labor market that has gained strength.
Gasoline inflation was driven by the war in Iran, and that part of inflation has already been fading for the past few weeks.
But some of this inflation has been driven by the massive AI investment boom, including in infrastructure and data centers, that is creating all kinds of supply bottlenecks and surging prices for semiconductors, even those that go into consumer electronics, and surging electricity rates for consumers.
Then there’s the mindboggling boom of tech stocks that have created enormous wealth, on paper, in a very short time, and some of the wealth is itching to get spent, and is getting spent.
So that’s the situation the Warsh Fed faces.
The new statement: short and sweet without easing bias.
The so-called easing bias in the statement was removed — the phrase, “additional adjustments to the target range for the federal funds rate” (meaning additional rate cuts). It had already been hotly contested at the last FOMC meeting. It’s also part of the forward guidance that Warsh so loathes.
Here is the entire statement:
“The Federal Open Market Committee approved the following statement for release by a 12 – 0 vote:
“The Committee decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent, in support of the Federal Reserve’s dual mandate. The Committee reaffirmed its policy of maintaining ample reserves in the banking system.
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong. Job gains have kept pace with the workforce, and the unemployment rate has changed little.
“Inflation remains elevated relative to the Committee’s 2 percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy. The Committee will deliver price stability.
RMPs: The Implementation Notes:
The big change referred to the “Reserve Management Purchases,” where the Fed purchased Treasury bills to ease liquidity strains. Those RMPs ran at $40 billion a month through Tax Day, and were then reduced to $10 billion a month currently.
The Implementation Notes dropped the fixed purchase instruction and replaces it with “when appropriate.” This is the new language:
“When appropriate, increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves.”
This replaced prior language: “Increase the System Open Market Account holdings of securities through purchases of Treasury bills ….”
Warsh kneecapped the “dot plot.”
Warsh did not submit his own projections, so there were only 18 dots for the 19 participants.
The dot plot is part of the “Summary of Economic Projections” (SEP), which the Fed releases four times per year, and today’s meeting was one of the four. The SEP is one of the ways with which the Fed communicates to the public what its thoughts are about the future of the economy, the labor market, inflation, and monetary policy – all of which are part of the Fed’s “forward guidance” that Warsh has criticized, and that is now getting dropped. So this might be last Dot Plot.
Of the 18 dots, 9 saw rate hikes by year-end:
- 1 sees 3 hikes
- 5 see 2 hikes
- 3 see 1 hike
- 8 see no change
- 1 sees 1 cut.
Inflation projections in the SEP:
- Headline PCE inflation by the end of 2026 rose to 3.6% from 2.7%.
- “Core PCE” inflation by the end of 2026 rose to 3.3% from 2.7% from 2.7%.
- Not hitting the 2.0% inflation target till 2028 (same as in prior SEP).
“Longer-run” (beyond 2028) projections for the federal funds rate remained at 3.1%.
GDP growth projections for 2026 declined to 2.2% from to 2.4%.
Unemployment rate projections unchanged: The median projection for the unemployment rate at the end of 2026 declined to 4.3% from 4.4%. These is a historically low unemployment rate.
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Great summary, thanks very much.
Just watched the DOW drop around 600 points and bond rates shoot up. Gold and Silver down significantly.
Wish I could figure out how to invest in these markets.
“Wish I could figure out how to invest in these markets.”
Buy SPCX 🤣💔
12 more days until I can dump my SPCX shares, hope it’s still up by then!
I moved 90% into cash in my brokerage over the last year to earn some negative return interest, and I am just doing some random gambling to stay entertained with the last 10%.
Up is down and down is up is what it sure feels like trading these days.
What, no disclaimer?
Thanks for the insider tip Wolf.
I will go ALL in.
I thought it might be all good …. Then when you endorsed….
So I decided full send….all in.!!
Haha
Timing is off.
Selling off.. wait until it settles
we are in the latter stages of a secular bull market, so figure five or six more years. Don’t let occasional drops bother you. If you’re in the S&P500 you are in a good place. Notice what the market did between 1995 and 2000.
we are in the latter stages of a secular bull market, so figure five or six more years. Don’t let occasional drops bother you. If you’re in the S&P500 you are in a good place. Notice what the market did between 1995 and 2000.
Finally, a good Fed chair. So happy to see all the dovish languages removed from the Fed statement. Powell was doing this to appease the market. What a nice change.
Hopefully, Warsh’s clear communication stands the test of time. Powell, nor the majority of his predecessors, had a clue what they were doing, and they obfuscated their language as a cover. Read this book: Lords of Easy Money: How the Federal Reserve Broke the American Economy by Christopher Leon. Leon chronicles how Powell gutted a successful bearing manufacturing business, in Milwaukee, WI, and ended up selling debit, and he exited a company that was left for dead and deep in the red. They ran that company into the ground while cheating their employees. This is the Neanderthal that was entrusted with operating the Fed, which should be abolished completely…but that’s another conversation.
nothing new I heard. Lets wait and see how he manages fed balance sheet. He has always been proponent of QT. Now you are driving the car and you control speed and direction. We wait.
Nick Timiros WSJ ripped into him on the credibility mantra – why aren’t you hiking now if credibility is one of your goals.
That’s obvious why: A new chair needs to let things settle down and work on consensus. Warsh had 8 of 18 participants on the side of a rate hike by the end of the year, and that’s not a consensus, that’s a perfect split for the end of the year. He would probably have had no votes for a rate hike today. He also needed to explain what to expect in terms of future Fed communications, which he did, and not spring a total surprise at the market. There was enough surprising stuff in these materials.
Frank Zappa: “I would say the illusion [of freedom] will continue as long as it’s profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain they will just take down the scenery, they will pull back the curtains, they will move all the tables and chairs out of the way, and you will see the brick wall at the back of the theatre.”
Zappa, Frank. Interview with Jim Ladd, April 1977. Source: “Wikiquote.”
Yeah, I agree with Wolf.
Medium term I think they’ll probably tip a bit dovish as the last thing the Fed wants to do is raise rates before the midterms with this executive.
After the midterms, I guess a bit more hawkish? Speak silently but ambush with a big stick. Less chance of balance sheet / Fed put stuff as he doesn’t seem like a big avoid the depression guy like Ben or Powell, leans more into I’m just the monetary policy, sir.
The end of the year is a long way off.
Inflation, conversely, is now.
Kick the can.
Does anyone actually see a meaningful, extended decline in inflation?
When I heard Warsh abstained, my immediate thought was he didnt want to upset DJT and get called names.
It is not made public how he would have voted unless he himself discloses it.
Nick is mad because less blathering from the fed means he’s out of a job.
Good for Warsh! Hate that many of my positions were down today, but I’m thrilled he’s taking the Fed towards operating the way it used to operate- limited public communications, no forward guidance.
So I wonder if less FOMC communication means the Fed Put is dead, or if it means the Fed Put is stronger than ever?
KevWar’s rationale was that Fed overcommunications were distorting markets and preventing natural price/rate discovery. He also reasoned that forward commitments or forecasts were hindering the pace at which FOMC members could change their minds in response to new information (see 2021).
Now that we don’t have JPow calming us down, and markets have to guess at the next FOMC move rather than being warned six months in advance, I expect more volatility.
I just can’t figure out whether that reduces the perceived value of the Fed Put and causes asset prices to fall by the amount of reduction in the value of the Fed Put.
Perhaps the plan is to let rates run and force Congress to confront the fiscal side…..
Lol.. ok that was good. Thanks for the laugh.
There are basically 3 choices:
1. Cut SS/Medicare
2. Raise taxes
3. Miracles
“Social Security is hurtling toward a fiscal cliff that, if left unaddressed, will force an automatic 22% benefit cut for tens of millions of retirees, survivors, and their dependents in just six years.
That’s the stark warning from the release last week of the 2026 Social Security Trustees’ Report. A nonpartisan fiscal watchdog, the Committee for a Responsible Federal Budget (CRFB), found the program’s financial imbalance has reached its most severe point in nearly 50 years—and that inaction by lawmakers is making a bad situation measurably worse.”
I know that Wolf has done articles addressing Social Security and its finances. If there was a recent article I missed it.
But the takeaway I got from his article(s) was that there is a lot of doom out there regarding SS, but in fact it was a manageable situation. I could be wrong; looking forward to the next update on SS/medicare.
It’s very manageable. But Congress refuses to manage it. They just need to tweak a few things, just like they did before. Congress has known this for years. There are numerous proposal out how to fix it. But they’re not getting any kind of traction.
https://wolfstreet.com/2025/11/18/social-security-fiscal-year-2025-trust-fund-balance-income-outgo-deficit-and-interest-rates/
There are certainly more than the three choices you list. Here are 3 more.
* Adjust SSI … e.g. remove annual cap for top earners.
* Reduce defense spending.
* Inflate!
You missed one;
4. Cut defense spending.
There is also the most likely one – all of the above, including cutting military spending. Saint Reagan pretty much did 1 & 2 when he & Tip “saved” social security.
Old people are not going to take a cut in payments, and they are not going to privatize because they know that will lead to a cut. At best, they’ll maybe accept raising the retirement age brackets over a period of time, but maybe not.
You missed #5 – borrow the next $40 Trillion. But who are we kidding? That’s #1.
You forgot option #5: Inflate their way out of it.
Which is currently what is happening.
Oh at 78% of SS benefits is still better than zero. If people wanted to keep SS solvent they shouldn’t have been voting for greater than 10 trillion dollars in tax cuts for top earners over the past 25 years.
You reap what you sow.
#6 We all switch to Melaniacoin and forget all of this ever happened
Yes, it reached that point for the second time in my working life. The first time, it got fixed (our full retirement age was moved out and other things were tweaked). It’s not that hard to fix it a second time.
0. Inflation.
All .gov balance sheet ills are cured this way. Not any old inflation, but the well curated kind.
And you sir are a fool, The most successful Federal program in history, Social Security only needs an empathic Congress to enact the minor palliative that is required to save Social Security
122% total debt to GDP. Congress fully intends to do nothing and allow the 22% haircut. That’s why they’ve been so tight-lipped about Social Security, recently. Reducing those payments won’t slow growth, because fiscal stimulus will continue to grow even as Social Security benefits are cut. The real economic effects, in aggregate, will be “transitory”.
Allowing SS benefits to be reduced does not reduce the deficit at all. SS is self-funded and has zero impact on the deficit today.
However, if Congress does nothing until the Trust Fund runs dry and then tops off the benefits every year to keep them at 100%, that top-off amount becomes part of the deficit.
My thinking was that patching Social Security to remain 100% funded would slow real economic growth due to the reallocation of capital.
I was thinking the net net result of patching social security to contnue delivering 100% benefits would be higher inflation. Having people set aside more of their paycheck to pay for social security recipients benefits would likely just result in people who are still working demanding higher wages. I can see how it could get complicated though, so maybe I am wrong.
I dont think this is the plan. FED has always worked with Gov and supporter Gov fiscal policies and this is the case in the future.
All talk, no walk is what I see.
1 and 2 year rates sure ripped higher
So did the real yields on 5-year and 7-year TIPS. Holy cow. A little more of that and I’ll need to borrow a truck I can back up.
Hmph. I didn’t think I was gonna like him. But I actually think I kinda like him. Brevity is so refreshing these days.
Best FOMC I’ve seen in a long while 👏🏻
I have to say I smiled while reading Wolf’s write up. Welcome aboard Fed Chair Warsh!
While scanning all the comments, my brain read your Fed Chair Walsh as Fed Car Wash.
It is interesting to note Warsh’s lean towards “monetary policy surprise” (SF Fed language) in light of the recent SEC proposal to permit semiannual reporting in lieu of quarterly reporting. I’m certainly not educated enough to tease out the nuances of a potential combination of a more “surprising” Fed and fewer compliance reports (assuming the semiannual proposal is adopted and companies choose to file semiannually), but the combination seems like it would lead to a much more volatile market.
It’s about creating better conditions for corruption to fester. Enron could have lasted another couple of quarters, and to some people’s minds that’s a waste.
More smoke, less mirrors.
“the combination seems like it would lead to a much more volatile market.”
Common vernacular: Free Market (well, freer). It’s about time. We’ll see if he can make any progress. I have my doubts.
He didn’t remove the spiked punchbowl. But he also made no promises about future refills. Massive change in language, though I would rather see some very modest adjustments to begin chipping away at inflation. I know that some patience is in order as the fed’s internal politics must be dealt with. I can’t imagine what that must be like. Anyway a 25 bps rise in interest rates isn’t going to crash the economy, just like raising from 0 to 500 didn’t crash it either. It only slows down inflation marginally. Heck, it might give the fed some room for future cuts if and when they become necessary. These are the “boom times”, the “golden age” or whatever where rates should be normalized and prices stabilized.
He did, though: the RMP, or QE-lite, Powell was running. Cut it. Pulled that punchbowl.
Let’s see if the RMPs go to zero starting in mid-July. That would be a first step, it wouldn’t be removing the entire punch bowl, but pouring out a little bit of it.
Mr. Trichet looms large over any interest rate raises in environments like this.
We must always fight the last war…
Wolf, what’s your opinion on no more dot plot and the overall plan to reduce forward guidance?
I for one approve this reduction in “forward guidance” and a return to what one wag referred to when it was called a “bad boyfriend.”
I will miss the dot plot because it was fun to write about and to make fun of.
But forward guidance is toxic. In 2020 and 2021, forward guidance about rates staying at 0% for a long time and for QE to continue for a long time caused banks to load up on long-term Treasury securities and MBS, even as inflation took off. When the Fed was then forced to deal with inflation, and rates jumped, those securities lost a lot of value, and three regional banks collapsed in 2023. In a sense, that was the Fed’s fault – it should not have given that forward guidance. Banks relied on it, and died because of it.
Isn’t that still the banks own fault for presuming forward guidance that far out will be followed through on even if circumstances change? Hypothetically, if the Fed wasn’t releasing this type of guidance, would the banks then not just make their own projections as to where interest will be? And if they were simple enough to take previous guidance as set in stone would they not remain simple when making their own projections and make the same kind of mistakes or worse?
I’m not trying to defend dot plot I just think running banks is serious work and blaming the Fed seems in those cases seems misplaced, maybe SVB et al deserved to die?
The “look-through” approach persists.
He maybe the deciding vote. BTW the balance sheet is heading up, so much for hoping they’d get it down to 4 ever again.
5 is the new 2.
Haha
Bonds in 2030 gonna be 15%
/s
Reducing the B Sheet is one of his prime directives. It will take time.
He can just allow banks to carry treasuries to meet SLR and have no limit. Low balance sheet with all that moved to banks.
Over the past four weeks, the balance sheet is actually down a little. The RMPs are just $10 billion a month (down from $40 billion a month), and it looks like will go to zero after mid-July. MBS are still coming off the balance sheet and are being replaced by T-bills.
10 billion here and 10 billion there after awhile we talkin real money 🤣
He didn’t strike me as someone prepared to handle a leadership role. He struck me as someone who is going to get tackled or sucker punched.
Everyone get tackled or sucker-punched in Washington. It’s part of the deal. These jobs are not for the faint-of-heart.
Maybe the FED is about to go dark like a stealth F35 Strike Eagle..
Warsh made a big deal about removing forward looking guidance and then deleted some forward-looking guidance. Rates on hold, as expected.
By not raising rates with CPI well above 4% and climbing, there is STILL an easing bias. The fraudulent “2% target” has never been hit in over 5 years, and they are sitting pat doing nothing. “Transitory” is back.
DC,
You have to stop with the logic already. Let people enjoy their brief honeymoon with the new chair.
And here we have Trump saying he caved to Iran because it would make the stock market go up. Imagine hearing something like that from Truman or FDR during WW2.
Trump knows the stock market banging new highs is like throwing gas on a fire for the economy. It hits the top of the news cycle. Keeps confidence and spending humming along. But contributes to sticky inflation.
A friend asked me to help her find out why a $1000 a month annuity’s distribution hasn’t decreased the balance. Called customer service and they said the stock market.
My defined benefit pension fund 60% in stocks is about 30% overfunded now.
Ehh, I think it certainly emboldens spending and confidence among the top 10% or so who own more than 90% of the stocks. For everyone else, not so much.
Agreed.
I am surprised in the opening remarks Warsh stated that the committee voted to keep ample reserve policy. I think the whole taskforce thing is related to the disagreements between Warsh and the FOMC committee on ample reserves and probably other issues.
That’s my read too: Taskforces are supposed to come up with persuasive well-documented proposals. In terms of the balance sheet, he said that explicitly: the task force will look into the pros and cons, the benefits and the costs and risks, of a big balance sheet, and my take is that they will make a persuasive case that the costs and risks of a big balance sheet outweigh the benefits, so that other FOMC participants begin to agree. One solution could be that they finally define “ample” but at a level that is much lower than now.
Looks like the prez was scammed. He will be no super dove.
What a legend, hoodwinked Trump to get the chair and then changed direction to get it right.
Such was the lack of confidence in Treasury bills, the 30 year rate actually went down! Let’s hope his reviews result in throwing some QT in the mix.
Maybe one day we’ll have government’s that will balance the books. Borrowing 6% of GDP every year… It’s like spending the entire value of the retail sector, with money you don’t have every year. Absurd.
I am pretty certain that no one was hoodwinked. He effectively said they are going to use task forces to eliminate dissenters, create or modify data to support cuts, then push them through. He is a hand picked Trump appointee who immediately hired two writers of Project 2025 as consultants. Their goal in 2025 was to completely dismantle the Fed and replace it with a formula for rates with no other market intervention. The task forces are the elimination part then they are going to use the formula to justify rate cuts.
I am not making this up, BTW. This is what they said they would do, and it is freely available on the internet.
I too am encouraged that his strategy might potentially be to go silent and defy Trump’s calls for near 0% interest rates and inflation out the wazoo. Get in first. Break political promises second.
Trump could then rail against the Fed for letting inflation happen or raising rates and killing the job market, but he would convince fewer and fewer people, because KevWar will just be this quiet bureaucrat sitting in the corner doing his job.
Trump thought that job was being a scapegoat for the politicians and their fiscal policies, but KevWar might have different ideas.
I am glad the FED is stopping all of their foreward looking statements. They were useless and just served to box themselves in. They made the FED less nimble, less able to react to changing information.
Besides, the FED shouldn’t be a forward looking organization. They aren’t designed to predict the future. They are set up to understand what is happening right now and act appropriately. Forward looking statements just slowed them down. Instead of acting appropriately they would spend the first meeting changing their forward looking statements then actually change rates with their second meeting.
Plus they simply were not good at it. I bet if someone took their Dot Plots from the past few years and compared them to what actually happened, the predictive results would be worse than random. Monkeys throwing darts would be better.
It was hard to understand Warsh with Trumps nuts in his mouth!
Also, instead of giving forward guidance, I would like to see how each board member voted (plus hopefully putting an end to the already dying practice of striving for unity in votes).
I think it would be extremely informative to know that 60% of the board votes to keep rates the same, 35% voted to increase them, and 5% voted to lower rates.
Dear Big Bad Wolf Task Force,
“When appropriate, increase the System Open Market Account holdings of securities through purchases of Treasury bills”
Do you, with your whiskers of wisdom, think this is going to increase yields on T-Bills to attract more private (non-govt) money to fund the govt,
Or
With the new reparations promised to Flock of Seagulls, do you think the elites are trying to kill the government, so they can change to a monarchy?
You left out the statement that it replaced. This the portion you quotes says that T-bill purchases could be and would normally be $0.
The prior Implementation Notes REQUIRED T-bill purchases. This version is a reduction of T-bill purchases.
“With the new reparations promised to Flock of Seagulls”
Have to concede that a chuckle escaped when I read that. Now I have an earworm to deal with.
Glad someone laughed at something other than my bank account balance
This may be the beginning of Wolf’s point from his 5/29 post: a small number of companies (12) are holding an exorbitant amount of market cap (roughly $30 trillion.) You can bet some of the recent “drunken sailor” consumption levels are based on the wealth effect the investors in those companies are perceiving.
So, what will happen if the Fed goes into another interest rate hike cycle? Or even if it does only two or three hikes? A portion of the current inflated market cap of these companies was based on the expectation of further rate cuts. How much market cap decrease will there be if the expectation turns into rate hikes instead of cuts?
No easy answer to those questions, but if Warsh goes heavily hawkish the market cap effect will be substantial. The drunken sailors will be weaned from their consumption bottle, at least for a period. Possibly long enough to be a recession trigger, as Wolf pointed out.
It will all come out in the Warsh. The next 12 – 18 months should be interesting.
Beyond the “New Fed,” there is growing power among folks who believe in socialism that cannot be brushed aside. People who subscribe to this are now in charge of several major US cities, and several are taking the step to enter Congress.
If more power goes this way, many changes could be forthcoming, including to US capitalism itself.
Social security problem can be fixed. Just tax everybody the same regardless of income level. In other words, get rid of the cap. Million dollar incomes would pay the same percentage of there income as fifty thousand dollar earners.
“their” income.
Thanks for coming to the interview, but we are not going to hire you.
autocorrect fail.
It would have been great if Warsh or the press asked Warsh about the 2% inflation target. Specifically, whether the Fed and FOMC will view the 2% target as a ceiling or symmetric. Under former chair Powell, the fed viewed 2% as symmetric.
There was not an emergency 50bp rate hike this month, after May CPI came in at 4.2%, so the 2% target is fiction.
He said that the entire inflation complex will be topic of one of the task forces. So we should hear a lot about it later this year.
A far more effective method of reining in price relative to wage purchasing power might be found in the use of changing tax rates.
It has an immediate general effect on consumption trends , whereas interest rates affect only those indebted and of those , only those who have a maturity .
A flat income tax rate , implemented in the same manner as the consumption tax that is used globally , which can be adjusted accordingly , makes far more sense than the repetitive word salad minutiae that has passed for central bank communication , especially since the period of listening to a nonsensical Greenspan wax eloquent about nothing.
Central banks have proven themselves less than reliable and less than accurate in their ” predictions ” and appropriate responses to economic conditions.
Taxes are the equivalent of a government withdrawing from the economy that which has been spent into the economy.
A semi annual/ annual adjustment of an imposed consumption tax , governed by a verifiable inflation rate makes more sense than financial institutions front running markets, courtesy of the Fed , accumulating non productive gains , while the economy periodically chokes on its debt burden.
Central Banks have proven very reliable in carrying out their mission:
transferring wealth
upward
How does a flat tax rate, as opposed to the progressive brackets we’ve had since the beginning, help to rein in inflation? The rate for most consumers would have to go up to offset the removal of the upper tax brackets on very high incomes, and this would reduce net consumption.
As an alternative idea, I once herd an idea to make the tax rate variable based on a formula. After quarters of strong GDP growth and high inflation, the tax rate automatically goes up a little, applying brakes on the economy AND removing the incentives for politicians to use deficit spending to juice the economy to get re-elected. Side bonus: Government debts taken on from recession stimulus get paid back when the economy is running hot, and can afford it most.
Most arguments I’ve heard for flat income tax rates involve removing or minimizing deductions/tax breaks. I know Ron and Rand Paul had proposals that retained deductions with a flat 10 or 15% rate (don’t quote me on that).
The goal of a flat tax is: it’s collected!
It’s in opposition to the loophole systems currently in place.
Take the minimum federal wage, $7.25 per hour, and multiply it by a 2,000 hour work year. That equals $14,500.
All income up to $14,500 has no federal tax liability. After that, all income, regardless of source, should be taxed by the IRS at 20%.
A Modified Flat Tax.
Didagree. That would lead to additional wealth concentration, which is economically inefficient. Income taxes should be based somewhat on ability to pay.
Chris
The point that was being made , and was not clear by my omission, was an introduction of a consumption tax was more effective in my mind than a the blunt instrument of interest rates
Further , again my opinion , is that interest rates can be utilized to create bubbles , while consumption taxes are generally less manipulative on a relative basis and have a much more direct and pervasive effect on the price structure than do interest rates
Sorry, but the math doesn’t work. America has in fact had this kind of DEBT:GDP before. We know the only tax structure that gets us out of this mess. Maybe we can call it the “New New Deal”… Anything less will simply accelerate the coming feudalism.
Hedge accordingly.
““Inflation remains elevated relative to the Committee’s 2 percent goal”
does this not spell out bias and forward guidance?
looks like continued acceptance of inflation and money debasement – the ongoing FED playbook for decades now – wealth transfer for those with access and close to the money – ongoing support for money lenders and the debt system
“does this not spell out bias and forward guidance?”
the only bias in this statement is the 2% inflation target. You might say the target should be 0%, and anything else is a bias.
agreed. And that is a huge bias that transfers wealth.
Money extracted via taxation does not disappear. It is spent by the government which, based on history, spends it in unwise and unproductive fashion. Misuse.
You say”whereas interest rates affect only those indebted “…also affects the lenders and their return. And the money from the return for lending also becomes and economic engine…..it is spent.
Hmm. So the new plan is to shut the hell up and raise rates? I like it!
Doesn’t eliminating “forward guidance” create an incredible risk of insider trading on the lead into these fed meetings…. ?
FED’s target inflation rate is 2% on which it has failed miserably for last 5 years or so. If FED is really serious about taming inflation, then keeping in mind current inflation at 4% plus, they’d have sent a signal by raising 25bps instead of jaw boning.
I pity the people trusting FED on this. Trust what they have done, not what they are saying.
I am sure they are working on under reporting inflation metric to manipulate the rates down.
@jon
Ask yourself, why were rates higher for all of recorded history except the past 20 years? Seriously ponder it, if your control structure of society is based around finance and you find yourself bankrupt, what happens to your power?
I like some of the things this Warsh guy is saying!
Wolf, oh Wolf…Wolfie…do you have to run any and all comments by the F Ed before posting them? Just curious.
No and they don’t.
This morning we see T-bond yields FALLING(!) at the same time as “rate hike expectations” are going STRATOSPHERIC.
Tell me how this is possible.
Long-term yields have nothing to do with short-term yields.