E
companies to the Fed’s already large balance sheet. Allowing the central bank to buy assets of, and thus assume a partial ownership interest in, private companies would give the Federal Reserve even greater influence over the economy. It could also allow the Fed to advance a political agenda by, for example, favoring investment in “green energy” companies over other companies or refusing to purchase assets of retailers who sell firearms or tobacco products. Mr. Rosengren’s proposal to allow the central bank to “invest” in private companies seems like something one would hear from democratic socialists like Senator Bernie Sanders. This is not surprising since the entire Federal Reserve system is a textbook example of socialism. The essence of socialist economics is government allocation of resources either by seizing direct control of the “means of production” or by setting prices business
arlier this month, the Federal Reserve responded to Wall
Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, so the Fed cut rates again – driving interest rates
to near zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending. Boston Federal Reserve President Eric Rosengren has suggested that Congress allow the Federal Reserve to add assets of private
CLICK HERE TO READ THE WEB VERSION
CENTRAL BANKING IS SOCIALISM
22
March 2020
Made with FlippingBook - Online Brochure Maker