The Fed Doesn’t Stabilize Markets—It Creates the Chaos
Last month, the Fed cut rates by a quarter point. Two weeks later, betting markets flipped—what had been a lock for December suddenly dropped to a 33% chance. Officials started dissenting.
Strong views, significant disputes among voting members, and now, more cuts aren’t guaranteed. This swing has created tens of billions of dollars of uncertainty for businesses and has added hundreds of basis points to mortgage quotes in the blink of an eye. It boils down to 12 people with all of the control, unable to reach a consensus. This is a significant flaw exposed by letting a central committee set the price of money in a $29 trillion economy.
It played out poorly. According to Federal Reserve minutes, the Federal Open Market Committee (FOMC) managed a 10-2 vote, deciding to cut by 25 basis points. One governor pushed for 50, another for 0, so they found a compromise of sorts. Then, on November 19, we see “strongly different views” repeated ad nauseam. Chair Powell made clear the move is “not a foregone conclusion — far from it.”
What was the result? Chicago Mercantile Exchange (CME) FedWatch odds took a nose-dive from 90% to 33% in just 14 days. Thirty-year mortgage rates jumped from 6.4% to 6.8% and back in a single week. Companies began imposing hiring freezes. Families walked from housing contracts. “Data-dependent” is not supposed to look like this.
The idea of the Federal Reserve was sold back in 1913 as a protective insurance measure. Since that time, the dollar has lost 96.8% of its buying power—a 1913 dollar now buys about three pennies. The issue is that we still face panics and catastrophes—bigger in scale: 1929, 2008, 2020—each followed by trillions printed for banks, while we got the bill.
We hear a common counterclaim that pushes us to continue the current path—”without the Fed, we’d have 1907-style runs every decade”—let’s examine that. Every pre-Fed crisis was caused by laws banning nationwide branch banking and forcing an inelastic currency, essentially overregulation and red tape. Canada had no central bank, allowed nationwide branching, and had essentially zero panics from 1870 to 1914. Same era, same gold standard, zero central planning—and zero crises. The problem was never unchecked banking; it was damaging regulation. We just traded one bad rule for 12 people with a money printer who are never held accountable.
What can we do to course correct? A few straightforward fixes voters could demand from Congress. Force the Fed to follow a clear rule—like the Taylor Rule, a straightforward formula that links interest rates to inflation and economic slack—or Nominal Gross Domestic Product targeting, linking policy to steady, predictable growth in total spending. Simplify and remove the dual mandate. The Fed has an impossible job to establish both stable prices and maximum employment at the same time. Pick price stability and let employment follow—trying to manipulate both is how we got into this mess. Repeal the remaining banking restrictions and let private money compete. If Bitcoin, gold-backed dollars, or anything else holds value better than what the Fed prints, let people decide.
We should demand the audit, the rule, and competition. We are not following sound policy when we allow twelve people to gamble with our mortgages, our savings, and our futures. We’ve been going down the wrong path for 112 years running. If we’re not ready to abolish the Fed, it’s past time to reform it.