How often have your more government oriented friends said: “But look. In 2008 the markets failed. We need more intervention by the government in the economy to right the ship.”
This argument was long used by New Dealers to justify the actions of FDR. The argument has just been updated for this century.
And the argument, as it was long ago, is now, nonsense.
It is because the Fed (Alan Greenspan) panicked after the tech bust and then the September 11th attacks and then pushed rates down far too low for far too long that the Housing Bubble blew up and ultimately popped. The Fed made money cheaper than the market wanted, which then encouraged rampant malinvestment, which then created a catastrophically unstable world economy, which then toppled over.
Below Ron Paul reminds us that interest rates are the price of money, and are the prime mover of all other prices.
So if interest rates are the price of money, and interest rates are set arbitrarily by the Fed, and rates of interest in turn highly influence nearly every price of nearly everything in the world, what does this say about our price system? What does it say about the system which imploded in 2008? Was it the “free market” which failed?
No, it was economic planning which failed. But one won’t hear that from the planners.