Fed Up

The Fed has decided yet again not to raise rates. Although, there is growing dissent ever where you look, even inside the Fed itself. Depending on who you ask, you will hear many different ideas on what should be done or should’ve been done. At the end of the day we are in uncharted waters. We’ve been experimenting with policies that have never been used before or at least not on the scale they are being used now.

Many originally blamed the Great Recession on the Fed keeping rates too low for too long. Over the past eight years rates have been even lower for even longer. So if this is true, who knows how many bubbles are out there just ready to burst at a moments notice. There could be none or there could be dozens. I think the Fed is hesitant to do anything in fears the boat will not only be rocked but it will sink. The problem is doing nothing could intensify what ever issues might lay out on the horizon.

At the end of the day, rates must go up. We can’t keep incentivizing debt under the guise it helps the economy. At most it helps the markets which rarely ever trickles down to main street. Whatever main street gains will be wiped out in the next crash due to future bubbles. There is also the issue of the Fed choosing winners and looser. The Fed mentioned all of the issues with Wells Fargo but the problem is, they caused this unethical behavior. They’ve told every US company that if you grow your big enough we will make sure you won’t fail. No matter how unethical you are and no matter how many bad decisions you’ve made. It is a recipe for disaster.

The Fed has an impossible job to do. Since it’s beginning it has been asked to manipulate capitalism in a way that creates nothing but upside with none of the downside. Simply put this is impossible to do. For capitalism to work you have to have destruction. No one likes it but whatever is destroyed will be replaced with new industries, companies and ideas. By restricting and trying to control capitalism your creating more problems than you are fixing. If passively manged mutual funds almost always beat actively managed funds over the long term, why do we assign a group of individuals to actively manage our economy? It’s absolute insanity.

I don’t know what the Fed will do next and I have no idea what the consequences will be. The problem is no else knows either, including the Fed. We are in uncharted waters that we should have never waded into to begin with. Despite the pain it might create, we have to stabilize our economy. We have to center it on real growth, not artificial debt inflation. Let the free market spread it’s wings and fly. Stop clipping its wings and sticking it in a cage.

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