The Impotence of Monetary Policy and the Federal Reserve

By Bruce Johnson

The job of central bankers is to prevent free-market forces from impacting an economic situation. Monetary policy apparently cannot halt a previously declining manufacturing sector. The Federal Reserve's record level of accommodations hasn't helped. Any benefits of those moves have been scooped up by the federal government via reduced borrowing costs. When the Fed steps into the weekly Treasury auctions and buys those Treasury obligations, it is merely lending new money to the federal government. Japan was the first to delve into the era of near-zero interest rates. We can see what their budget deficits did during the contrived low-interest rate environment. Low rates increased borrowing and deficits. Ben, have you noticed? Their manufacturing has not responded. The United States and Japan have lost manufacturing due to other factors. Zero interest rates do not cure that which interest rates did not cause. But zero interest rates are the drug of choice for more government borrowing and spending. The net effect of governments setting zero interest rates, then borrowing.... (Read Full Article)