Fed played role in economic crisis
(COLUMNIST) ROBERT Samuelson is a big believer in the Federal Reserve’s ability to “stimulate” the economy by keeping interest rates artificially low (“Fed can’t cure economy on its own,” Dec. 14). What he fails to mention is that the Federal Reserve’s manipulation of the money supply played a major role in getting us into this crisis in the first place.
Artificially low interest rates distort the true price of capital. They spur investment when economic conditions do not warrant it. Interest rate manipulation in particular assisted with inflation of the real estate bubble.
This is not simply my opinion, rather it is the viewpoint of an entire group of economists from the “Austrian school.” Friedrich Hayek won a Nobel prize in economics for his groundbreaking work on the important role prices play in the economy. Interest rates are simply the price of money over time. Manipulating that price obviously ripples through the entire economy, thus creating the boom and bust cycle we’ve seen in recent years.
Congress can best promote economic growth by eliminating corporate welfare, including the Export-Import Bank and taxpayer-guaranteed loans, reducing regulations, taxes and cutting spending both domestically and on warfare state abroad.
DEBBIE ROSEN
Albuquerque