The Federal Reserve Has Been Mispricing Money for Decades and You Are Paying the Price

The Number Nobody Wants to Talk About

Sixty-eight straight months. That is how long inflation has run above the Federal Reserve’s 2% target. We are currently sitting at 4%. Double the target. And every talking head on television wants to tell you it’s going to go away soon, that oil prices will drop and everything will be just fine.

That is not how this works. Prices do not shoot up overnight, and they do not come back down overnight either. Once prices rise, they tend to stay elevated. That is the uncomfortable, real-world consequence of mispriced money, and it is something I have been warning about for years.

What Mispriced Money Actually Means

When the Federal Reserve artificially suppresses interest rates, it distorts the entire economy. Capital flows into the wrong places. Bad investments get made. Bubbles form. And then, eventually, they pop.

This is not a new theory. Ludwig von Mises described this mechanism decades ago in what is known as Austrian Business Cycle Theory. Artificially low interest rates cause a misallocation of capital. Investors and businesses take on risks they would never accept if money were priced correctly.

Let me give you the historical pattern, because it is undeniable:

• Between 1995 and 2000, the Federal Reserve expanded the money supply by 40%. That cheap money flooded into dot-com stocks, inflated companies to absurd valuations, and triggered the NASDAQ collapse.
• In 1998, the Fed slashed rates following the Russian default crisis and the Long-Term Capital Management blowup. Nobel Prize winners running a hedge fund making catastrophic decisions, bailed out by cheap money policy.
• During COVID, cheap money flooded into commercial real estate deals structured at rates that made zero sense at higher borrowing costs. Those deals are now collapsing.
• Every single major bubble I can identify traces back directly to Federal Reserve policy. Every one.

The Contradiction Nobody Is Asking About

Here is what genuinely frustrates me. The Fed raises interest rates with one hand while simultaneously using quantitative easing to expand the money supply with the other. I need someone to explain to me how those two actions are not working directly against each other.

The Fed controls the overnight lending rate. But it does not control long-term bond rates, which are driven by supply and demand in the open market. When you are approaching $41 trillion in national debt, the supply of bonds being issued is enormous. That puts upward pressure on long-term rates regardless of what the Fed does with its benchmark rate.

And yet politicians, including calls for the United States to maintain the lowest interest rates in the world, want to keep money cheap. That is populist nonsense. Cheap money is not a gift. It is a slow-motion transfer of wealth away from savers and everyday consumers.

Inflation Is a Tax, Full Stop

I want to be direct about this. Inflation is a tax on the consumer. It is not some abstract economic concept. It is the reason your grocery bill, your rent, your insurance costs, and your utility payments have all climbed and mostly stayed climbed.

The Fed’s own target, the 2% inflation goal, is itself an acknowledgment that the central bank plans to slowly erode your purchasing power year after year. At 4%, they are doing it twice as fast as promised.

What should you be paying attention to right now:

• Whether the Fed holds rates, raises again, or begins cutting in the near future, every decision affects your bond holdings, your savings rates, and your real estate values.
• Real estate investments made during the COVID era at aggressive valuations are under serious stress as higher rates expose the flawed assumptions underneath them.
• Your cash sitting in low-yield accounts is losing real purchasing power every single month that inflation runs above your interest rate.

The Pattern Keeps Repeating

Alan Greenspan. Ben Bernanke. Jerome Powell. Different names, same playbook. Easy money creates the boom. The boom creates the bubble. The bubble pops. The Fed responds with more easy money. And the cycle repeats.

The difference this time is the scale. We are not talking about a $5 trillion economy anymore. The distortions are bigger, the debt is bigger, and the eventual correction, whenever it comes, will reflect that scale.

Understanding this history is not about being pessimistic. It is about being prepared. Know where your money is, know what risks you are carrying, and do not let anyone tell you that 68 months of above-target inflation is a problem that fixes itself quickly.