Tag: interest rates

  Many people view the Federal Reserve’s role in monetary policy as an unqualified good. If there isn’t enough money in the economy, or if there is too much debt or deflation, then the Fed should print money until both situations are fixed.

  Simple.

 But it isn’t that simple.

Monetary policy is a zero-sum game. It’s much like Isaac Newton’s 3rd law of motion: for every action there is an equal and opposite reaction.

  Not only do many people fail to understand that, they are also under false impressions of what the reactions are and who they effect.

  I know that the GOP hasn’t taken over the House yet, but at the same time the markets are considered to be “forward looking indicators” by respected economists.

 Given that, let’s look at what has happened since the huge Republican victory in November.

In these insane years, the only people making sense, and the only people with what appears to be what used to be called “common sense” are those who are now labelled “extreme left”.   You know, Democracy Now, Dennis Kucinich, etc.

Well, Kucinich now can’t help but wonder if the Federal Reserve isn’t paying banks to NOT make loans.

It makes a lot of sense.

http://rawstory.com/08/news/20…

Ohio Democratic Congressman Dennis Kucinich wants to know: “If [the Troubled Asset Relief Program] isn’t about keeping people in their homes or providing credit to businesses, what is it for?”

Expressing his frustration before the Government and Oversight Committee, the two-time presidential candidate suggested that the Federal Reserve may be paying banks to hoard money and avoid making loans.

Banks make loans in order to make money.   If they don’t make loans, then what are they in business for?   Why would they quit making loans?