William Thien

Overcoming America’s Longstanding Inflationary Policy Hangover

Posted on: January 3, 2016

Here is another failure of monetary interventionism I’d like to describe to you.

One of the most disastrous effects of the FED’s extensive period of low interest rates is that it stimulated inflation on almost every product that wasn’t in the category of products subject to governmental price controls, such as basic food stuffs. Houses, cars, nearly all big ticket items doubled or often quadrupled in price during the last ten years while the median income of the American family has dropped. But this is not the only disastrous side effect of the FED’s policy.

The FED’s desire to keep interest rates low occurred during a period when Chinese imports flooded the US marketplace. What the FED’s policy did was to substantially increase the profits for Chinese producers while undermining the margins for US producers, not for the large ticket items but for the bread and butter products I’ve described previously in observations on this subject.

Now that the FED has moved to begin raising interest rates we should ask if such extensive influence over the economy is advisable? And should there be some option for intervention in the future if the FED sits on interest rates, high or low for that matter, for so long?

Copyright © William Thien 2015




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