Apr
16
The Fed Has Bet the Financial System on Misguided Theories
ByThe Fed has bet the financial system on academic theories, that upon close inspection defy even basic common sense.
One could easily write a multi-volume set of books on the Fed’s mistakes. However, in its simplest rending, the biggest flaw in the Fed’s models pertains to its total lack of understanding of human behavior.
The Fed believes that if interest rates are low, investors will seek out higher returns by piling into stocks or even real estate. As these asset prices rose, the investors would feel wealthier and so go out and spend more money… which in turn would drive the economy towards growth (70% of US GDP stems from consumer spending)…
The Fed Has Bet the Financial System on Misguided Theories
