Time For Regime Change At The Eccles Building: Interest Rate Pegging Is Destroying Capitalism

David Stockman reports:

The argument for the dangerous absurdity of providing zero cost funding to carry-traders and speculators is that the US economy was smacked by a 100-year flood type event during the 2008 financial crisis and, therefore,”extraordinary monetary accommodation” is required to heal the damage. But that is a bogus rationalization.

The financial crisis was caused by the Fed, and then became an excuse for extending and intensifying an interest rate pegging regime that has been in place for 27 years—essentially since the Greenspan Fed panicked after the Black Monday stock market meltdown in October 1987. Indeed, Bernanke didn’t gum about the “zero-bound” inadvertently; it was, in fact, the end game of the Greenspan Fed’s core premise: Namely, that the business cycle can be flattened (if not eliminated) and macro-economic performance improved by pegging prices in the money markets; and that there will be no untoward effects from supplanting market price signals and allocations with a regime of administered money.

In truth, the Fed’s quarter century march to yesterday’s pathetic rerun of yet another episode of “lower for longer” has produced virtually the opposite of the Greenspan Fed’s premise. That is, macro-economic performance has worsened, while the negative side-effects—serial financial bubbles and massive extension of debt and leverage in all sectors of the US economy—have been monumental.

An article well worth your time.