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EconoMeter: Is Fed out of tools to boost the economy?


Sunday, October 2, 2011

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Kelly Cunningham, National University System
Answer: Yes

Stop attempting to help by interfering in the marketplace. The Fed’s latest “Operation Twist” policy further restricts credit availability for small businesses based upon the false premise that moving already historically low interest rates even lower will stimulate the economy into recovery. Low interest rates are part of the problem, not the solution. Increasing the costs of short-term borrowing and lowering returns on long-term loans puts further pressure on the profitability of an already beleaguered financial sector. Attempting to boost spending by increasing debt exacerbates structural imbalances underlying the U.S. economy and will make the inevitable crash more devastating.