The Fed Myth: What It Can’t Do (That You Think It Can)

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There’s a lot of noise — and a lot of misinformation — about the Federal Reserve’s true influence over your mortgage, credit card, and car loan rates. In this episode, we cut through the nonsense and explain what the Fed actually controls (hint: it’s not what most people think). From misattributed Mark Twain quotes to fiscal recklessness driving long-term rates, this is a reality check for anyone blaming Jay Powell for everything under the sun. The truth? The Fed doesn’t have a magic button — and our real problem starts in Washington.

Episode Transcript

Speaker 1 (00:00):
The Watchdog on Wall Street podcast explaining the news coming
out of the complex worlds of finance, economics, and politics
and the impact it we'll have on everyday Americans. Author,
investment banker, consumer advocate, analyst, and trader Chris Markowski.

Speaker 2 (00:16):
What the Fed can and cannot do. There's an old saying.
It's attributed to Mark Twain. It's sometimes it's wiser to
keep quiet than to speak, even if it means people
might initially assume you're ignorant. Basically, you know what, it's
better to in essence, it's better to look like a

(00:41):
fool than to, you know, open your mouth and remove
all doubt. It's been used a myriad of different ways,
attributed to Mark Twain, who knows, who knows, But anyway,
it makes a lot of sense, and unfortunately nobody heeds that.
In today's day and age, we have social media where
anybody can just go out and just spew absolute nonsense.

(01:01):
And the funny thing is, you know, I guess that
they put it in all caps, and the more that
they do it again, I guess they assume that they're
lies and their ignorance can become the truth, and in
many cases they're not wrong case in point, the Federal Reserve.
There lots of lots of people out there going after J. Powell,

(01:23):
going after the Fed Reserve, thinking that the Fed, he's
got the power. Well, yeah, yeah, they got the power.
That song by Snap from the nineteen nineties. Yeah, they
got the power. They can lower mortgage rates, and they
can lower your credit card rates, and they can or
lower your car loan rates. They've got the power. No. No,

(01:45):
the Fed controls the Fed Funds rate, the Fed Funds rate,
overnight rate, which banks lend to one another, rates, consumer rates,
mortgage rates, car loans, credit cards. That's determined by the market.

(02:10):
That's determined by in escence. What the ten years trading at,
what the thirty year is trading at. I'm gonna go
over this again to many people out there that decided,
you know again, that believed the lie that became the truth.
Go back to this past fall. It's not that long ago. J.

(02:32):
Powell lowered interest rates by one hundred basis points and
mortgage rates went up. Can the Federal Reserve? Can that
Federal Reserve try to mess with interest rates through asset purchases,
basically buying long dated treasuries. Yes, they can, but that

(03:00):
would obviously expand the fed's balance sheet, and they do
that usually in times of financial crisis. They did a
lot of that during the during the Great Recession, and
an essence, it can cause more problems than it can
be destabilizing. What determines rates simple supply and demand. You

(03:28):
want rates to come down, really want me to do well?
Then you know what, Let our country be a little
bit more fiscally prudent. We issue so much damn debt.
It's ridiculous. If the demand doesn't meet the supply, the
bond prices will then fall, yields will rise, push up
long term borrowing rates. Now again. Question was asked as

(03:53):
former FED governor actually wrote a piece of the journal,
Patrick Harker. Is this a monetary policy problem or is
this a fiscal problem? Answer yourself that question. It's it's
our problem. It's a fiscal problem. We just again, we

(04:14):
borrow too much money, We print too much money, we
spend too much money. This is why rates are where
they are. That's it. FED doesn't have the power, doesn't
have any sort of magic power. He doesn't have a levery,
It doesn't have a button on its computer saying lower
mortgage rates, lower credit card rates. It doesn't work that way.
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