Does anyone really know what the Federal Reserve does? Most of us have a vague idea that it controls U.S. monetary policies. That would be correct. What is less known is that the Federal Reserve continues to kick the can down the road by continuing to practice the theory of endless credit and money printing to bandage all wounds.
They are answerable to no one, and their powers have grown tentacles. The Federal Reserve knows it has problems. However, the issues have gone unresolved for so long, and it is difficult to cure their roots. Some of the problems go back to the Great Depression.
For the past 30 years, the Federal Reserve has created easy lending policies by keeping interest rates low. This has resulted in the accumulation of debt that might well result in a total downturn of the economy. This artificial manipulation of money created the housing bubble, where people who couldn’t afford a mortgage were buying a property with disastrous results.
While easy money might have helped us through the financial crisis of 2008, the Federal Reserve has continued its easy-lending, low-interest monetary policy. It’s been more than ten years and has served only to create more debt and income disparities. The members of the Federal Reserve have taken it upon themselves to create a financial crisis after financial crisis by continuing to manipulate short-term interest rates.
This policy keeps rewarding the upper echelon of business as the price per share of a company’s stock keeps rising, and creating artificial wealth for stock owners. It does nothing actually to grow the business.
There is no sign of any change in the Fed’s monetary policy, and there is every chance their on-going policies will be the cause of the next financial crisis. By keeping interest rates low, this policy is meant to encourage banks to lend money and stimulate the economy. The Fed has recently injected $400 billion into the economy. The Federal Reserve is now redistributing wealth instead of letting companies create new and greater wealth. What funds are taken in by corporations is now geared toward repaying the accumulation of existing debts instead of growing the business.
Debts need to be repaid. However, the debts that have grown since the 2008 financial crisis have not been paid back. In some instances, companies are struggling, or have given up struggling, paying just the interest on their debt. The global debt is believed to have surpassed $250 trillion. That’s an incredible 320 percent of the world’s GDP. Easy lending and QE policies have buried borrowers under an avalanche of debt that has reached crisis proportions. And this crisis has been created through the policies of the Federal Reserve.
In the event of an economic slowdown, the current low-interest rates do not provide sufficient wiggle room for the Federal Reserve to lower the rates any more to prevent a possible disaster from occurring. It is shackled by its own long-term policy. This means that to solve any economic crisis, the Federal Reserve will have to increase its QE policies, lend out more easy money, and create an even greater and monstrous debt bubble. The Federal Reserve has turned into a buyer of bonds and stocks instead of a regulator of financial policy. A lack of liquidity in the system is also an issue that could arise.
