Things are sure getting wild on Wall Street. On Thursday, the Dow Jones Industrial Average plummeted almost 800 points before roaring back and recovering nearly all of those losses. The Dow closed just 79 points lower for the day, and if you only looked at the final number you would be tempted to believe that there is not much reason for concern. But these wild swings up and down are precisely what we witnessed back in 2008, and they are a sign that the stock market is literally teetering on the precipice of disaster. And it almost certainly would have been a historically bad day for stocks on Thursday if not for a very well-timed article in the Wall Street Journal. Once news broke that the Federal Reserve is considering “a wait-and-see approach to rate hikes”, stock prices immediately began to rebound…
Stocks closed well off their session lows on Thursday after news broke that the Federal Reserve could tighten monetary policy at a slower pace than previously expected.
The Wall Street Journal reported the central bank is considering whether to signal a wait-and-see approach to rate hikes at its upcoming meeting this month. The report said Fed officials do not know what their next move on rates will be after December.
This just shows the immense power that the Federal Reserve possesses.
As I have discussed so many times previously, the Federal Reserve has far more power over the U.S. economy than anyone else does, and that includes the president of the United States. Just the mere suggestion that the Fed may slow down the pace of rate hikes was enough to send Wall Street into a feeding frenzy. Nothing that President Trump could have possibly said could have had that sort of a positive impact.
And this is a perfect example of how fundamentally flawed our system is. Personally, I believe in free markets, and so it deeply, deeply offends me that we have an unelected, unaccountable panel of central bankers setting our interest rates for us. As I have repeatedly proposed, we need to shut down the Federal Reserve and return to a system where interest rates are determined by the marketplace.
I’ll get off my soapbox for now. As I noted yesterday, stocks originally began plunging when news broke that Huawei CFO Meng Wanzhou had been arrested in Canada and would be extradited to the United States…