The Federal Reserve revealed a division between members regarding a long-term interest rate as part of its monetary policy to improve the economy.
The problem with keeping interest rates low is that it is not solving the problem of unemployment. The Fed does not coordinate its policies with other government agencies. The bank regulators are requiring the banks to increase their reserves to prevent bank failures. The Fed is just trying to help out the banks.
The Fed’s numbers regarding inflation and unemployment are questionable. The unemployment numbers only reflect the people currently on unemployment. The numbers do not reflect the people whose unemployment benefits have run out. An article from the New York Post indicates the unemployment rate is actually closer to 22 percent.
In addition, any person who goes to the supermarket, gas station, or doctor knows the Fed’s numbers on inflation are wrong. There is inflation, as indicated by an article from Jim Jubak at MSN.
People are beginning to wonder if the Fed really knows what it is doing. Alan Greenspan admits he made mistakes keeping interest rates so low and allowing no interest loans. Bernanke is just helping out the investment banks, like Golman Sachs. The investment banks make money on issuing Treasuries, as reported by Quora.com.
Bernanke let Lehman Brothers fail because he was loyal to his old firm, Goldman Sachs. It appears that the Fed is not helping the American people. It is helping the government pay debt in devalued dollars and giving Wall Street fat cats bail-out bonuses, as indicated by Rolling Stone.
Lower interest rates are not promoting building and the real estate market. The Fed is not doing anything to increase employment. During the Great Depression, the government created public works projects to get people back to work building dams and roads. The government is not creating jobs.
It is trying to create more jobs through consumer spending and more debt by decreasing interest rates. Cash for clunkers helped foreign automakers. This can only work for so long. In addition, the government’s free trade policy has ruined manufacturing in the U.S. A consumer and services economy can not continue to survive on consumer debt. It caused the housing bubble. The Fed is just trying the same thing over again. If it really wants to do something, then it would suggest taxing Chinese imports.
The Fed is decreasing the value of the dollar. This may help the government pay back debt in the short run. However, in the long run, the Fed’s actions will increase inflation and interest rates, as indicated by Investing Answers.
It is obvious that the Fed and the government really do not have the American people’s interest as their number-one priority. It would appear that devaluing the dollar and helping out Wall Street bankers is the Fed’s priority. The actions by the Fed will not fix the economy. It may make things worse.