re: Fed Reserve President Thomas Hoenig predicted exactly what’s happening today in 2010.

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Wrong

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So, you're one of those.

Here, let me elaborate:

The Federal Reserve influences the federal funds rate in order to control inflation. By increasing the federal funds rate, the Federal Reserve is effectively attempting to shrink the supply of money available for making purchases.

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No. It sounds like a lot of middle class folks prospered, and even though interest rates on savings fell so fix rated to borrow money.

Furthermore, many in the middle class prospered as they watched their investments steadily rise.

I do not believe the middle class has had it bad. Do you?

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Well, if you believe government statistics I would guess those stats would say the wealth gap has widened and the “middle class” has noticeably shrunk since the financial meltdown of 2008/2009.

BTW, what’s considered middle class now? I would guesstimate that in 2007 if a household income was $60-70k a household was considered solid middle class…today that income has to be at least $110k to have the same standard of living and perhaps it’s higher than $110k? I also don’t believe true/real inflation was ever below 3% from 2008 through 2019.

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Thanks for the CFA level 1 primer on FFR

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No problem.

But to put it more succinctly: "rates are largely controlled by the Fed."

Our founding fathers predicted what would happen when they started our country if we let in the subverters.

Benjamin Franklin:

If they are not expelled from the United States by the Constitution within less than one hundred years, they will stream into this country in such numbers that they will rule and destroy us and change our form of Government for which we Americans shed our blood and sacrificed our life, property and personal freedom. If they are not excluded within two hundred years, our children will be working in the field to feed them while they remain in the counting houses, gleefully rubbing their hands.

I warn you, gentlemen, if you do not exclude the them forever, your children and your children’s children will curse you in their graves. Their ideas are not those of Americans, even when they lived among us for ten generations. The leopard cannot change his spots. They are a danger to this land, and if they are allowed to enter, they will imperil our institutions. They should be excluded by the Constitution.

If the Fed was powerful enough to control interest rates we would not have the issues we are having. Congress thanks you for believing this. The TD banking experts have been spinning in a frenzy for 6 months at this point

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If the Fed was powerful enough to control interest rates we would not have the issues we are having.

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You really don't seem to be making any valid points. You agree with this statement:

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The Federal Reserve influences the federal funds rate in order to control inflation. By increasing the federal funds rate, the Federal Reserve is effectively attempting to shrink the supply of money available for making purchases.

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...Yet disagree with this statement:

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To be fair, rates are largely controlled by the Fed. Volcker showed us that the way to deal with inflation is to remove money from the system by raising the Fed rate. The problem today is that the interest paid on the national debt is indirectly affected by the Fed rate.

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Perhaps you could actually contribute to the discussion in a meaningful way by explaining the material difference between the two quotes above.

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Congress thanks you for believing this.

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Yup. If there weren’t an endless and (seemingly) infinite supply of treasuries to purchase—almost none of this would be happening.

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I'm curious to know what kind of a drop in inflation might we see when the supply gets back to pre-COVID levels - if any - if ever. The article seems to imply that it's all due to the money supply.

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When interest rates are raised next year and tapering speeds up, and if supply chains are fixed, you’ll see inflation back to a more normal rate. You won’t see deflation, i.e most prices of goods won’t go back up pre inflation levels. Businesses rarely lower prices once people get used to them. You can see commodities go down but products won’t, people will just increase profit margins to make up for revenue lost during covid. On the positive side when profits increase you’ll likely see a rise in wages so eventually it balances out.

This is a best case scenario. We are at a point if we don’t start fixing these problems it can spiral out of control and lead to hyper inflation and a major economic depression that will be much more painful. Raising rates and tapering will cause a market correction but it should be short lived. Not doing it will kick can down the road but eventually you run out of road and go off a cliff

There's not really much to respond to. I said the Federal Reserve can influence the Federal Funds Rate. So in other words, they can control the overnight lending rates banks charge each other. That doesn't have anything to do with treasury rates, corporate bond rates, nor inflation etc...

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To be fair, rates are largely controlled by the Fed. Volcker showed us that the way to deal with inflation is to remove money from the system by raising the Fed rate.

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The first sentence is a false premise. The Fed controls the overnight lending rate on reserves. THAT IS IT. The second sentence is a narrative we've been led to believe because it's simple for education purposes. Reality was much different. Volcker made inflation worse during a period of high secular growth when the economy wasn't built to service said demand.

You should probably get it out of your head that the Fed is some all powerful agency. All they can do is influence FFR and swap bank reservees for collateral. They aren't the ones who doubled SNAP or allowed taxpayer guaranteed PPP, shut the global supply chain down etc...

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The second sentence is a narrative we've been led to believe because it's simple for education purposes.

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Either a gross simplification or an attempt at propagandizing narcissistic federal bankers? Bank of Japan supplies a clear example of the failure of central banks being able to set the money supply based on short-term rates. They've been failing at it for how many decades now?