The United States’ central bank, known as the Federal Reserve bank, plays a confusing and arguably ineffective role in the global economy. Taking a step back, the Fed’s mandate is simple: Maximum employment, stable prices, and the moderating of long-term interest rates. Put simply, the Fed’s job is to ensure that the average American can find a job, invest their savings, and ensure that inflation does not keep them from putting food on the table.
At this point, you are probably asking, why isn’t the Fed doing their job? Today, food prices are 9.4% higher than this time last year, housing prices have risen by 18.6%, and the average mortgage rate over the last year has increased by 76.6%. All the while, from 1985 to today, U.S. wages have increased by 1.21% while China has seen 13.94% growth.
When inflation runs rampant, the Fed immediately looks to “tighten” financial conditions, a la making life for the average guy more expensive, via the raising of short-term interest rates. Today, the Fed has it wrong. This is a recession born out of poor policy and a “take it easy in China” mindset.
The supply chain is deeply damaged from the COVID-19 pandemic, and as a result, we are seeing supply shocks across the globe. If COVID has taught us anything, it showed us the importance of self-reliance via the manufacturing of products domestically, especially those “critical goods” deemed essential for our national defense.
It may come as a surprise to hear that 97% of antibiotics distributed in the United States are imported from China, which are critical to the health care of U.S. citizens. Further, China accounted for 81% of global “rare earth mineral” mining production, a good that is imperative to produce batteries and other sustainable goods.
Today, we have a cumulative trade deficit with China in the amount of $6.3 trillion, which represents $20,127 per U.S. citizen. This wide moat that China operates within has led to significant job losses across the U.S., most notably affecting the manufacturing sector, where average wages are 480% higher than that of a retail sales associate. Even more shockingly, for each U.S. citizen, foreigners own $54,000 more income producing assets in the USA than we own abroad.
We are letting other countries rob us blindly, and we solve that by sending more “aid.”
The Fed is a failed organization, whose lack of care and consideration has cost this country, and its people, trillions of dollars. Recently, I learned that the Fed does not track data relating to employee benefits to measure income inequality. The more time that passes, the more I see how little the Fed does, and how little they know, about the U.S. and global economy. You don’t see the central banks of other countries placing the needs of global competitors over their own, much like we see with the U.S. Fed.
We need a Fed that will stand behind tariffs, hold China and other countries accountable for manipulating their currency, and focus on ways to incentivize U.S. producers to build out additional plant, property and equipment in the U.S., ultimately creating more jobs.
Leadership in other countries is founded on one simple principal: The Homeland is number one. The U.S. has historically placed its own needs on the backburner so it can “aid” other countries, yet the countries we provide said assistance to run massive trade surpluses with the United States.
We must immediately demand equal, fair trade and place a 50% tariff of the amount of surplus with the U.S. We must overturn the U.S Central Bank and force it to focus on free and fair trade, full employment via higher-paying jobs, and most importantly, the building of a robust middle class that shrinks each year. China, for example, saw its middle class expand from 2% in 2002 to 75% today, while we have fallen by 9% during that same time period, to around 50%.
We must put and end to this before we kill the economic engine that was once the United States of America.
Charles Shor is the former president and CEO of Duro Bag and founder of the Charles L. Shor Foundation for Epilepsy Research.
This article originally appeared on Cincinnati Enquirer: Opinion: Federal Reserve bank failing at its job as inflation runs rampant