FED Drops Rates to Zero, Stokes Inflation

This from Steven Chase:

Tim adds:

I knew someone would do something to crash the economy before the election. Tim Geitner as head of the NY Fed worked with Hank Paulson to pull the rug out from under the GOP and give us Obama (Read Masters of Audacity and Deceit to see how they did it. https://www.amazon.com/Masters-Audacity-Deceit-William-Been/dp/1613463707 I am a footnote in that book, in the interest of full disclosure.) I thought the Fed would push rates way up and kill the recovery, but they didn't because there was a worse way to kill it with the pandemic shutdowns.

Still, Trump screwed up in appointing Janet Yellen's posterior suction cup Jerome Powell as Chair. He was Yellen's protege' and a staunch Keynsian.

I would add that zero interest rates are ultimately destructive in that they discourage lending; who wants to lend at no profit? We need reasonable interest rates for long-term growth. Especially when the government is forcing banks to lend despite there being no profit in it for them. They'll lend alright - but in a way that will make them money. It's how we got the subprime mortgage industry, as a way to make money by selling money to unqualified buyers to please Uncle Sam.

Keeping rates at zero will keep the economy humming now but there will be a bust in due course. It was a huge part of what led to the Great Recession in the first place, the FED had kept interest rates too low for far too long, and only raised them when Trump was in office to make him look bad.

The low rates led to the housing bubble as everyone could use other people's money to speculate.

Posted by: Timothy Birdnow at 08:08 AM | No Comments | Add Comment
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