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The Cost of Free Money

Jared Powell

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Published in The Cost Of Free Money: How Unfettered Capital Threatens Our Economic Future

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The Cost of Free Money: How Unfettered Capital Threatens Our Economic Future

by Paola Subacchi

4.1 out of 5

Language	:	English
File size	:	2140 KB
Text-to-Speech	:	Enabled
Screen Reader	:	Supported
Enhanced typesetting	:	Enabled
Word Wise	:	Enabled
Print length	:	320 pages

In the wake of the 2008 financial crisis, the Federal Reserve embarked on an unprecedented experiment in monetary policy. In an effort to stimulate the economy and prevent another Great Depression, the Fed slashed interest rates to near zero and began purchasing massive amounts of Treasury bonds and mortgage-backed securities. This policy of quantitative easing (QE) was intended to make it cheaper for businesses to borrow money and invest, and to encourage consumers to spend more.

For a while, QE seemed to work. The economy began to recover, and unemployment fell. However, as the Fed continued to pump money into the system, asset prices began to rise. Stocks, bonds, and real estate all became more expensive. This was good news for investors, but it also made it more difficult for ordinary Americans to buy a home or save for retirement.

In addition to fueling inequality, QE also contributed to a surge in debt. Businesses took on more debt to finance their investments, and consumers borrowed more money to buy homes and cars. This debt-fueled growth was unsustainable, and it eventually led to the 2008 financial crisis.

The Fed's easy money policies have also had a negative impact on the environment. Low interest rates have made it cheaper for businesses to pollute, and they have also encouraged consumers to buy more gas-guzzling cars. This has contributed to climate change, which is one of the most pressing challenges facing our planet.

The Fed's experiment in easy money has failed. It has not led to sustained economic growth, it has fueled inequality, and it has created a generation of debt-ridden millennials. It is time for the Fed to change course and adopt a more responsible monetary policy.

The Fed's Easy Money Policies

The Fed's easy money policies have been in place since the 2008 financial crisis. These policies include:

Cutting interest rates to near zero
Purchasing massive amounts of Treasury bonds and mortgage-backed securities
Keeping interest rates low for an extended period of time

These policies were intended to stimulate the economy and prevent another Great Depression. However, they have also had a number of unintended consequences, including:

Rising asset prices
Increased inequality
A surge in debt
Negative impacts on the environment

The Cost of Free Money

The cost of free money has been high. It has led to:

Increased inequality
A surge in debt
Negative impacts on the environment

Inequality has increased because the Fed's easy money policies have benefited the wealthy more than the poor. Low interest rates have made it easier for the wealthy to borrow money and invest in stocks and real estate. This has led to a widening gap between the rich and the poor.

The Fed's easy money policies have also contributed to a surge in debt. Businesses have taken on more debt to finance their investments, and consumers have borrowed more money to buy homes and cars. This debt-fueled growth is unsustainable, and it eventually led to the 2008 financial crisis.

It is Time for a Change

The Fed should:

Raise interest rates
Reduce the size of its balance sheet
Adopt a more transparent and accountable monetary policy

These measures will help to reduce inequality, slow the growth of debt, and protect the environment. They will also make the financial system more stable and resilient.

The Cost of Free Money: How Unfettered Capital Threatens Our Economic Future

by Paola Subacchi

4.1 out of 5