Then you?ll likely appreciate TIME?s new profile of Thomas Hoenig, president of the Kansas City Federal Reserve Bank:
[F]or all the headlines over the past quarter-century about the death of American manufacturing and the twilight of community banks and the vanishing farmer, those humble building blocks of a sound economy still figure significantly in Hoenig’s perspective. The way to strengthen them, he believes, is not by pumping money into a financial system that encourages megabanks to engage in high-risk speculation. You build them up by encouraging savings, which form capital for investment, which builds stronger businesses, which hire workers and pay dividends–which leads to more savings and more investment.
But by keeping interest rates near zero indefinitely, the Fed is “asking savers to continue to subsidize borrowers,” Hoenig says. “What incentive is there to save and invest?” This insight was gaining ground after the irrationally exuberant Alan Greenspan years at the Fed. The former chief issued a mea culpa for piling too much money onto the economic bonfire that led to the Great Recession.
For more on the Fed?s role in the economic ?meltdown,? click play below for Mises Institute scholar Thomas Woods? perspective.
