The Phaserl


Shovel Ready: How The Fed Makes Us Dig Our Own Graves

from The Daily Bell:

I just read an article from what the mainstream considers a reputable source of news, the New York Times. The article talked all about monetary policy and didn’t say a thing about the real world.

Because the Federal Reserve is not operating in the real world. They are operating in a world of currency manipulation that they pass off as saving the economy. They act like they are guardians of the dollar when in fact they are just bandits for the government.

What the fed does to “cure” a bad economy is cut interest rates, which continues to make borrowing money easy. The money is there, but the actual value behind those dollars is not–that’s why the economy turned down in the first place. And that is what creates bubbles: when people keep spending easy-to-acquire money, even though tangible goods and services of value do not match how easy it is to get money.

So now the fed is basically stuck at a near zero interest rate when you adjust for inflation.

Right now, for instance, the central bank’s main short-term rate, the federal funds rate, is still only three-quarters of a percent to 1 percent, because the Fed wants to continue stimulating the recovery. This leaves the central bank with very little room to respond if the economy falters. Even a minor slowdown now could require a larger rate cut than is feasible, once again leaving policy makers wishing they could do more.

This dynamic can feed on itself. The less ammunition the Fed has to blast the economy out of its malaise, the weaker and slower will be the recovery, making it more likely that the next bad shock will require the Fed to cut rates more than is feasible.

Wait, you mean, they were just kicking the can down the road all along? And now they have reached the end of their ability to manipulate the economy without dire results? So all the little economic downturns they “helped avert” have really just been bundled up into one big giant bubble ready to burst and rain down, destroying the economy on impact.

It’s okay though, the government as always has the solution, and the New York Times is here to tell us what that solution is.

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1 comment to Shovel Ready: How The Fed Makes Us Dig Our Own Graves

  • Ed_B

    “They act like they are guardians of the dollar when in fact they are just bandits for the government.”

    The Fed does not work for the US Gov. They are both working for the same uber-rich elites who actually control the country and most of the world. The Fed actually serves the interests of the big NY banks, which are owned by the elites and run by their lackeys. Money IS power and with enough of it, it can be used to control the people in positions of power in the US Gov. No doubt some combination of bribery, threats, and applied mayhem serves to keep the rank and file under control. It’s no secret that many people get to congress with only a few hundred thou to their names, yet leave there 4-12 years later with millions in their pockets. That did not come from their salary as congress critters. No, it almost all came from graft and other forms of corruption.

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