The Federal Reserve announced it’s maintaining one of its staple policies virtually unchanged as it keeps the interest rate between 2.25% and 2.5%. But in order to do so without being attacked for making a bad thing worse, the Fed is claiming its decision is about keeping the economy “strong.”
As expected, stocks rose after the announcement, with Wall Street cheering on the monetary institution for its continuous and unshakable support. Unfortunately, the Fed’s enthusiasm for those in the top doesn’t spill over to the average consumer.
In its statement, the Fed claimed its goal is to keep unemployment rates low and prices stable, adding that it “will be patient” when looking at “future adjustments.” But what the institution forgot to explain was that it is fear of being blamed for a crash, as well as Wall Street’s pressure, that helped the board to make this decision. After all, if the Fed keeps interest artificially low, that means more malinvestment is on the way.
As Mises Institute’s Ryan McMaken explains, the Fed may consider low unemployment as proof of a strong economy but all other indicators show that things aren’t as good as they seem.
So as Americans fail to pay their auto loans and see their net worth drop, the Fed worries that increasing interest rates will jump start the recession. Unfortunately, a recession is inevitable whether it takes place now or in the near future, as years of balance sheet expansion (read increased money creation) and low interest rates sent the market all kinds of wrong signals. The result is greater government-created inequality, as wealthy households benefit from ultra-low interest rates while playing the stock market, but low-and-moderate income households cannot chase yield investments.
Additionally, middle-income households also suffer due to the impact of Fed policy on their pensions, as pension funds and insurance companies find it hard to invest in safe assets. Due to the Fed’s tinkering, safe assets are in scarce supply, helping to keep pension plans under-funded.
In the end, those with ordinary means are unable to save enough to keep up with monetary inflation and also unable to rely on their pensions. As the costs of assets and consumer goods rise, the average American both loses his dollar’s purchasing power and is later forced to work well after retirement.
So despite the claims and positive outlook, the Fed isn’t doing us a favor by keeping interest rates low. As a matter of fact, it is doing nothing but keeping its friends in Wall Street and Washington, D.C., happy while hurting the average citizen.
Unfortunately, those in Washington who claim to push policies that help the ordinary man are the Fed’s number one fans. Rep. Alexandria Ocasio-Cortez, for instance, even supports the Fed’s “money printing” policy in order to fund her Orwellian Green New Deal.
Whether she’s unaware of how that policy hurts the average American or not, it is clear people like her aren’t in the least interested in listening.