The Fed is a creature of Congress, which is to say that Congress completely controls the Fed. All talk of the Fed's independence has no constitutional basis. The Fed was created by an act of Congress and can be restructured, abolished, or otherwise changed however Congress likes by subsequent acts of Congress. Indeed, in the history of US central banking, Congress has done so before. Therefore, the Fed's continued existence is predicated on not motivating a congressional majority plus the executive or alternatively a veto-proof congressional majority to change things. Practically and observably speaking, that means when Congress says "print" the Fed says "brrrrrrrrrrrrrrrrrrrrrrrrr." There is no operational limit on how much money Congress can spend. There are real limits though, in particular the productive capacity of the economic zone that does business in US dollars. If, for example, China were to withdraw from the dollar denominated global market, it would be a severe supply shock and result in massive inflation.

Furthermore, most money in the USA isn't even reserves, but rather bank deposits. Theoretically bank deposits are supposedly somehow constrained by reserves, but that hasn't really been true for well over a decade. Raising rates doesn't directly impair banks ability to originate as many new loans and corresponding deposits as they care to. Conceivably, higher rates could reduce the demand for loans from credit-worthy borrowers, or even reduce the pool of credit-worthy borrowers directly, but I'm not sure it doesn't end up being a wash after accounting for inflation.

Personally I suspect most of the effects that we do see are related to hysteresis rather than a fundamental transmission mechanism from interest rates. That is to say, the shocking effects we see from rate increases aren't due to a fundamental change, but rather a lag while market participants to catch up with the new rules of the game.

Another important factor is the prestige media using all of its persuasive powers to convince market participants that Fed actions will result in a downturn. There certainly is a large psychological component to economic activity.

Given Congresses inability to get almost anything done other than the absolute "must-do's" like NDAA and yearly appropriations and then 1-2 big ticket admin items, why do you think that Congress has the capacity, much less the will to control or even exert significant interest over the Fed?

I think that if the Fed stopped acting in the interests of Congress’s real principals, who are observably not the general electorate, then we would see exactly that. It’s instructive to observe the cases where Congress reliably acts promptly and more or less unanimously. Pare off the procedural stuff and other fluff of course.

As a conceptual body it has the authority. The meat bags currently running the show have no motivation. Of course they too are Americans and would deflate their value by changing the rules, which is the problem with thought ending populist chants and mantras like “no new taxes!”

The public is “data structure” illiterate. They’re educated with spoken traditions coupled to vague imagery of hierarchical power structures of history and the work place. I am not sure it’s intentional, more of a Duning-Kruger thing.

As usual any sustained shift in the appropriation of agency is up to the public. Science shows us how to build things, but no theory states “we must build rockets to nowhere.” But “keep your hands off muh capitalism click clack” gets in the way of sincere discussion of fully automated logistics.

Protectionism of spoken tradition in human memory is not going away anytime soon. It’s innate to our biology.

> The Fed is a creature of Congress, which is to say that Congress completely controls the Fed.

No no no no no. It means that Congress created the Fed, and Congress can destroy the Fed. Congress can also change its charter.

But Congress is capable of creating and destroying independent agencies.

“I buy that car and fill it with gas. You drive it.”