Tuesday, September 22, 2015

Low interest Rates Cannot Save a House of Cards

Richard Ebeling emails:

Dear Bob,

I have a new article on the news and commentary website, “EpicTimes,” on, “Low Interest Rates Cannot Save a House of Cards.”

The Federal Reserve has, again, decided to maintain the Federal Funds rate – the rate of interest banks charge each other for overnight lending – at near zero, as it has for around seven years.

In dong so, it perpetuates a price control that prevents interest rates from telling the truth about the real availability of savings in relation to the demand for investment borrowing as reflected in the anticipated profitability of consumer-oriented production.

Indeed, by practically abolishing a market-formed and determined rates of interest to effectively balance and coordinate the savings choices of income earners with the investment decisions of entrepreneurs looking toward future-oriented consumer demands, the Federal Reserve’s expansionary monetary policy and interest rate manipulation assures a future economic and financial downturn when the realities of actual supply and demand reemerge in the market.

And which, no doubt critics of capitalism will once more tag as another instance of the “failure” of the market.



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