My bank’s bond portfolio is generating a greater yield than loans are.  That is rare.  A 525-basis-point increase in the federal funds rate in less than one year is very rare, too.

The Fed Reserve drove short rates up dramatically and inverted the yield curve.  Fed fund (short) rates are higher than the index for loan pricing — namely, five- and ten-year treasury rates.  Monetary Policy is crushing net interest income for banks.  That strangles lending activity, which depresses new capital for business expansion. 

Further, the Fed’s actions crushed business activity in a number of ways.  It created uncertainty in the market.  Investors and businesses are not buying or selling, so there is no lending.  Velocity is zero. 

Fed dabbling in MMT (Modern Monetary Theory: Q.E., or printing money) is devastating our private economy and condemning our children to massive debt.

Fed Reserve interest rates are not addressing the source of inflation.  Inflation is devaluation of the dollar through excess money supply, using another monetary policy mistake called Q.E.  This excess money supply was created to facilitate federal spending.  Look at the devastation wrought on households as prices for everything go up — all because our politicians are allowed to spend us into massive debt to facilitate their re-election.

When the citizen needs to give up more dollars to purchase the same commodity, that is inflation, and that is caused by devaluation of the dollar, and that was caused by excess money supply, and excess money supply was created to facilitate spending.  This is a death spiral.  No politician has the spine to stop it; therefore, we citizens must do it.

So the source of inflation and destruction of private wealth is federal action.  Inflation is a devastating tax brought to us by the very government that was created to protect our individual rights.

Blame the banks if you wish, but the real source of this malaise is our government.  More specifically, it’s our own fault for not stepping up and exercising the rights for which our nation’s warriors fought.  We elected the politicians; we can un-elect those who spend and drive us into debt.

Jay Davidson is founder and CEO of a commercial bank.  He is a student of the Austrian School of Economics and a dedicated capitalist.  He believes there is a direct connection joining individual right and responsibility, our Constitution, capitalism, and the intent of our Creator.

Image: pasja1000 via Pixabay, Pixabay License.