The Fed is tasked with a dual mandate: to ensure price stability and aim for maximum employment.

But according to Dan Morehead, CEO of crypto hedge fund giant Pantera Capital, there’s a third thing that the Fed has been doing — running a Ponzi scheme.

In his latest Blockchain Letter, Morehead says that the Fed’s “manipulation of the government and mortgage bond markets” is “the biggest Ponzi scheme in history.”

The expert investor even issued a warning on CNBC last week, saying that it’s likely that a “recession is coming.”

Let’s take a closer look at what he means.

Don’t miss

• Mitt Romney says a billionaire tax will trigger demand for these two physical assets — get in now before the super-rich swarm

• Stocks are down, but “cash is not a safe investment,” says Ray Dalio — get creative to find strong returns

• Warren Buffett likes these 2 investment opportunities outside of the stock market

Federal funds rate

Morehead argues that the Fed made a big policy mistake by keeping the federal funds rate far too low.

“The difference between inflation (their mandate) and their policy tool (fed funds) is much larger than at any point in history — including the disastrous 1970s,” he writes.

“They left rates at zero. Fed funds were 1.55% before the pandemic. They’ve just gotten overnight rates to back where they were before the pandemic policy eruption when inflation was only 2.30%.”

As we know very well by now, inflation is no longer at 2.30%. The latest Labor Department report showed that consumer prices rose 8.6% in May from a year ago, marking the biggest increase since December 1981.

And even that official reading was not accurate because it does not measure housing inflation in real time, argues Morehead.

Instead, the official CPI measures housing inflation using something called owner’s equivalent rent — how much it would cost a homeowner to live in their home if they were renting — and that metric only went up 5.1% year over year.

If you’ve been in the market to buy or rent a property, you’d know prices have gone up way more than that. The government says it uses owner’s equivalent rent because it’s only trying to measure the change in the cost of shelter while removing the investment aspect of homebuying.