The Fed’s activities for over a decade have been very focused on creating inflation (an increase in the money supply). Allan Meltzer wrote a great article the other day summarizing how inflation isn’t the solution to our economic problems… it’s the cause.
He revisits how Fed chairman Paul Volcker came on the scene and decided to directly combat the economic problems in the 70s by simply ceasing to manipulate interest rates and leaving them up to the free market. It was painful, but Volcker knew it was the only thing that could work. It’s refreshing to see a mainstream journalist write about the economy and actually have a pretty good idea what he’s talking about. Read the full article.
Food for thought: If ceasing to manipulate interest rates solves the problem caused by previously manipulating interest rates, for what good reason did the Fed return to manipulating interest rates thereby recreating the economic problems?
