When Congress passed the Humphrey-Hawkins Full-Employment Act in 1978 it added ‘full employment’ as a second and conflicting mandate to the original goal of price stability. This seemed like a good idea to those unrealistically seeking perpetual economic expansion. In reality, it was our present endgame in the making.
The full employment goal favored constantly rising debt-fueled consumption and inflation at the expense of longer-term stability and was eventually headed for the brick wall of nil and negative rates. We’re there now. With financial, political and social systems in tatters, shoring up stability is the next imperative of necessity. Read Chris Whalen’s latest, When the Fed became a socialist job creator, here’s a take away:
Today, Fed policy as designed by progressives like Hubert Humphrey and Gus Hawkins ensures lower consumer purchasing power through inflation and gradually robs public and private institutions of even a meager return on their savings. The focus of the FOMC is entirely on consumption rather than investment and long-term growth. The Humphrey-Hawkins law neither helps employment nor encourages long-term investment that might bolster the key ingredient of economic expansion, namely higher productivity on labor and capital.
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