So why has the Fed apparently put the stated goal of two-percent price inflation on the back burner? The realities of deficit spending mean the Fed can’t afford, politically speaking, to focus on price inflation right now. Given the runaway annual deficits and the federal debt, the Fed must turn its attention to doing what it has always done since its creation: intervene in debt markets to prevent interest rates on Federal debt from getting out of hand. It is clear the Fed already has its work cut out for it in this regard. Since September, yields on Treasurys have repeatedly increased, even as the Fed has tried to reduce interest rates. Meanwhile, the Federal government is barreling toward an annual deficit of at least three trillion dollars. History has shown that, in spite of the myth of Fed independence, the Fed is actually a very reliable partner of the Treasury Department when the Treasury “asks” the Fed to focus on pushing down interest rates in the interests of debt management. The Fed has repeatedly done this during wartime, and did it during the 1970s. The Fed’s sudden about face on interest rates since September reflects this political reality.