The first sentence: “The Federal Reserve is irrelevant unless it’s doing damage to the economy.” pretty well sums it up. From James Rickards at dailyreckoning.com:
The Federal Reserve is irrelevant unless it’s doing damage to the economy. Since the Fed is often doing damage to the economy, it does require our attention.
Claiming the Fed is irrelevant seems outlandish. The Fed dominates the headlines. An upcoming meeting of the Federal Open Market Committee (FOMC, the Fed’s interest rate policy group) on September 16-17 is already receiving outsized attention because of the likelihood that the Fed will cut interest rates for the first time since December 2024. Trump’s efforts to mold the Fed board of governors to his liking with appointments and firings is another focal point for market attention. At times, the Fed seems to be at the center of the financial universe.
It’s not.
It is true that the Fed is the central bank of the United States and that it has the power to print (really, digitally create) the U.S. dollar, the currency in which 60% of global reserves are denominated. It’s also the lead regulator of U.S. bank holding companies and almost all-important banks are members of the Federal Reserve System. There is a lot of power in those roles.
But the power narrative crumbles quickly when we look at what the Fed actually does and how they do it. That’s a task the Fed does not want you to do because they prefer to hide behind a curtain of monetary omnipotence. Let’s pull back the curtain and see what’s really going on.
