THE FEDERAL RESERVE
Increasing the purchase of federal debt is not the only action the Fed has taken in a desperate attempt to keep the economy afloat. Since the coronavirus lockdowns began in early March, the Fed has greatly expanded its balance sheet. The Federal Reserve has also launched an unprecedented program to “loan” money directly to businesses. While some states are beginning to end the lockdowns, it may be months or even another year before all the lockdowns are finally ended. It is unlikely that the economy will completely recover after the shutdown ends. The economy was teetering on the brink of a recession months before anyone heard of coronavirus.
and jobs. The lack of private capital will put pressure on the Federal Reserve to maintain, and even expand, its new lending programs indefinitely. Each of the Federal Reserve’s responses to the coronavirus shutdown increases the distortions of the market caused by the Federal Reserve’s meddling with the money supply and interest rates. These increased distortions guarantee the inevitable crash will be much more severe than the current downturn. The one upside is that the next meltdown will likely lead to the end of the fiat money system and thus the end of the welfare-warfare state. In the meantime, there is one thing we can be sure of: the “experts” will blame this recession or depression on a virus they will claim has shut down world commerce. There are two problems with this... First, the bursting of the bubble has been inevitable since the economic malpractice in responding to the 2008 economic collapse. And it is absolutely fallacious to blame this economic collapse on a virus. Viruses appear every year and kill sometimes hundreds of thousands of people worldwide. In reality, this economic collapse was caused by the disastrous monetary policy pursued by the Fed and hastened by the absolutely wrong-headed response to the virus: lockdown! The government-imposed lockdown has rendered a desperate situation even more catastrophic. Billions of dollars have been lost by government’s unnecessary interference in the right of people to earn a living. As more
The economy was teetering on the brink of a recession months before anyone heard of coronavirus.
Last September, a panicked Fed began emergency infusions of cash into the repurchasing market, which is where banks make short-term loans to each other. The Fed’s balance sheet expansion also began in September. The Fed was also pushing interest rates down before the coronavirus panic, and it will likely keep rates at or even below zero long after the crisis related to the shutdown subsides. Economic stagnation combined with zero or negative interest rates remove incentive for people to save. This depletes the supply of private capital available to invest in businesses
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May 2020
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