Jerome Hayden Powell is serving as the 16th chair of the Federal Reserve. He was nominated to the Board of Governors in 2012 by President Barack Obama and subsequently appointed as chair by President Donald Trump, confirmed in each case by the United States Senate. President Biden has renominated him to serve another four years. The chair and vice-chair are the first among equals on the Board of Governors who decide the monetary policies for the United States. Just as the president is elected every four years, the president can renominate the chair and vice-chair or choose someone else to serve one year after the election.
Mr. Powell is best known for coming up with new and novel ways to increase the nation’s money supply. The Fed creates money by pushing a few keys on its computer to buy assets, such as US government securities (bonds), from the federal government and securities from commercial banks. But under Powell, the Fed has found alternative ways to buy assets with its created money. Why has the Fed created trillions of dollars? The Fed’s thinking goes like this. An increase in the money supply will keep interest rates low, and consumers will borrow and spend more. But who gains most by the artificially low-interest rates?
The Cantillon Effect recognizes that the people who own the most assets benefit the most from low-interest rates, and indebted people benefit the least. Indebted persons will become victims once interest rates increase, and Mr. Market will make it so. Persons who profit the most from money creation are wealthy individuals and big corporations. If corporations had invested this borrowed money in new plants and equipment, everyone would benefit from economic growth. But instead, executives used the money to purchase their stock to boost stock prices, which qualified them for generous bonuses. So the rising stock market is a facade, and it’s fake, phony, and will end with a great crash.
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