Among it’s various other faults, one of the greatest problems with the Federal Reserve is it’s manipulation of interest rates, which would otherwise — in a truly free market, that is — be a price determined by supply and demand just like any other. Thorsten Polleit writes at Mises.org about the inherently bad results of this Fed practice:
Suppressing market interest rates to the lowest level possible seems to have become a key objective for central banks around the world as they respond to the turmoil in financial markets, the decline in output and the deterioration in the labor market.
However, it is a fatal policy: it amounts to fighting the correction of the debacle which has been caused by central banks’ downward manipulation of interest rates through a relentless increase in bank circulation credit and the money supply.
The Federal Reserve is, in short, prolonging the current bust which resulted from a boom of its own making by continuing the very policy which brought us to this point in the first place.Published in