The Insanity of the Federal Reserve

Well, we’re in Japanese territory now.  Interest rates are now between .25% and zero, and this particular interest rate is what banks pay in order to borrow money from the Federal Reserve.  Now banks can get the cheapest money they’ve ever seen in this country, and the real problems the economy faces have yet again been ignored.  Ben Bernanke thinks he needs to give cheap money to banks so they’ll start lending again so Americans will start spending again.  What does that solve?  Nothing!  If we keep on spending borrowed money we’ll continue our spiral into oblivion.  But even Bernanke has doubts about his interest rate cut, this from the “Economists View” blog: “Ben Bernanke does not expect further interest cuts to have much of an impact on the economy, so they will have to rely upon other policy tools”.  Yes, there are other “tools” he can use, but they are even more interventionist than setting artificial interest rates.  The more the government intervenes in the economy, the longer the correction will take.  My fear is that the government will intervene more and more, until there is no chance for us to transform our economy into one that produces and exports products, instead of just consuming products with borrowed money.

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