I’m speaking of economist David Malpass, who has a terrific article in today’s Wall Street Journal. His piece is entitled “Near-Zero Rates Are Hurting the Economy.”
The approach to the financial crisis the Fed has taken has been to get through the worst of it by keeping interest rates really low so as to prop up shaky industries. That idea, of course, is contrary to the Austrian prescription of non-intervention so as to allow the economy to make the necessary adjustments.
Here’s what Malpass says about the consequences of the Fed’s hair-of-the-dog policy:
“Nevertheless, more than a year after the heart of the panic, the Fed is still promising near-zero interest rates for an extended period and buying over $3 billion per day of expensive mortgage securities as part of a $1.25 trillion purchase plan. Capital is being rationed not on price but on availability and connections. the government gets the most, foreigners second, Wall Street and big companies third, with not much left over.”
The gusher of money is causing new asset bubbles and undermining the economic growth that we’d otherwise expect after a couple years of recession.
Economic manipulation got us into this mess and manipulation is setting the stage for more trouble.
