Federal Reserve officials like to pretend they can use interest rates like a motorcycle throttle on the U.S. economy. They can either rev things up by dropping interest rates or slow things down by moving rates higher.

The public has been led to believe the central planners can do whatever is needed with rates to keep things purring along.

The truth is the central planners at the Fed are meddling with forces beyond their control. They are encouraging consumers, companies, and government to take on debt. Soon, the nation will choke on it.

The U.S. government is once again running trillion-dollar annual deficits. That’s enough to terrify anyone who believes in balanced budgets and limited government.

However, in just a few years, virtually all of what the federal government borrows will be needed just to make interest payments on existing debt. Zerohedge refers to this as the “Minsky moment.”

If politicians want to continue spending money they don’t have on other programs (and you can bet they will), a lot more will need to be borrowed on top of what is needed to pay interest on the debt.

Fed officials will utterly fail at stopping the expansion of the debt bubble by moving interest rates higher. Their feeble attempt at hiking rates ended rather quickly when the equity markets began tanking late last year, and political pressure from President Donald Trump mounted.

The central bank’s control over the economy is an illusion. Fed Chair Jerome Powell and the other wizards there won’t be fine tuning economic growth by adjusting the cost of money up and down.

They can push short-term rates around directly and try to indirectly control long-term rates through bond purchases. Even that amount of control could be stripped from them when the market asserts itself.

The truth is that risk associated with lending money to the insolvent U.S. government has been way underpriced for years. This will eventually dawn on Treasury buyers.

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