Sound economics or insanity?

bernankeAlbert Einstein once defined insanity as “doing the same thing over and over again and expecting a different result.”

An article in USA Today entitled “Fed keeps interest rates near zero; economy continues to ‘strengthen'” seems to fit the definition.

I would go out of my way to strongly emphasize the quotes around the word strengthen. Artificially low interest rates are what brought our economy to the sad state it is in and are what continue to drive the economy closer to a depression. Though the article pretty much spouts typical Keynesian rhetoric and acts as though a “jobless recovery” is a completely rational explanation for the current state of un-employment in the country, it does contain one small grain of truth:

Super-low interest rates are good for borrowers who can get a loan and are willing to take on more debt. But those same low rates hurt savers. They’re especially hard on people living on fixed incomes who are earning measly returns on savings accounts and certificates of deposit.

The article does not explicitly explain why low interest rates hurt savers and low income earners but those who are familiar with Austrian economics will know that it is the inflation that is born from these low interest rates that causes the destruction.

If Lord Keynes was correct when he prescribed easy credit and government spending/deficits in the event of a troubled economy, why is it that years of following these policy prescriptions have brought the U.S. economy to the brink of depression? Why would we want to escalate these efforts when it seems to only be adding fuel to the fire?

While there seems little to be optimistic about in terms of economic policy these days, there is still hope. Since these policies are destined to fail because they misunderstand the root of the problems, more and more Americans will begin realizing Washington does not have the answers. This is why it remains so important to continue spreading the liberty message not only through economics but through all venues of politics.

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