Why is there a need for the Fed to set interest rates? If the US is a truly capitalist country, what would happen if interest rates were determined simply by supply and demand? Wouldn't this cause interest rates to be exactly where they needed to be? The problem with the Fed is that react to economic conditions either too slow or quickly, and often to an extreme. This causes widely swinging markets, recessions and inflation. The money supply and the velocity of money then react unnaturally. This negatively effects the (middle class) consumer, hence the economy.
I think Milton Friedman made the same type of argument once upon a time. The money supply is too high, causing the velocity of money to collapse, and fueling inflation.
Why is there a need for the Fed to set interest rates? If the US is a truly capitalist country, what would happen if interest rates were determined simply by supply and demand? Wouldn't this cause interest rates to be exactly where they needed to be? The problem with the Fed is that react to economic conditions either too slow or quickly, and often to an extreme. This causes widely swinging markets, recessions and inflation. The money supply and the velocity of money then react unnaturally. This negatively effects the (middle class) consumer, hence the economy.
I’m no expert but I think the impact will ultimately be felt by our children and grandchildren.
I think Milton Friedman made the same type of argument once upon a time. The money supply is too high, causing the velocity of money to collapse, and fueling inflation.
I only understand the basic relationships between revenue, growth, interest rates, and debt, but this article did a great job of explaining it.