Monday’s stock market tantrum has stirred up conversation about the policies of a largely overlooked player in the American economy— The Federal Reserve.
While those who closely follow the markets understand how The Fed’s actions (or the threat of future actions) have a significant impact on the economy, The Fed has largely been granted immunity from public examination. This is evidenced by the fact that the institution has, on numerous occasions, dodged efforts to “Audit the Fed.”
But now that an unprecedented stock market crash (at one point the Dow dropped over 1,000 points) has brought The Fed back into American’s peripherals, it’s important to revisit The Fed’s response to the previous major market panic, the financial crisis of 2008.
The “solution” in 2008 was to open up the floodgates of cheap money (which had already been an exacerbating factor to the collapse, if not the outright culprit) even further. The Fed lowered interest rates to near 0%, where they have been held for close to 7 years. The Fed also launched QE (Quantitative Easing), which amounted to a $4 trillion+ stimulus package.
It’s been said that the definition of insanity is doing the same thing over and over again, but expecting different results.
Yet despite the fact that our sluggish economy has nothing to show from these past attempts to artificially stimulate the economy (a St. Louis Fed official has even admitted as much), some of the most highly respected economic minds on the Right, such as Larry Kudlow, continue to dismiss calls for higher interest rates to restore sound money.
But why would Conservatives oppose efforts to tighten up our proven-disastrous monetary policy?
It’s just common sense that America’s economic woes won’t be solved by repeatedly executing the same policies that got the country into this mess to begin with.
Confronting the fundamental problem of loose money with even more easy money is akin to a cancer patient who refuses to have his tumor removed and instead seeks solace in pain killers and medical marijuana.
The truth is that loose monetary policy brings nothing but the illusion of prosperity. And until The Federal Reserve’s actions are finally scrutinized under the lens of the American public, markets will remain volatile due to government central planning.
We as Conservatives pride ourselves on returning America to solid, timeless foundations. And likewise, we should be at the forefront of restoring good money, not resisting changes to the easy money status quo.
Mark Elsasser is the Editor in Chief of Conservative Force.