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“The Fed Can’t Fix What Ails the Economy”

July 21, 2014
in Blog

Earlier this week, Janet Yellen, Chair of the Federal Reserve, pointed to several points that she felt warranted continued action by the Fed. In an article published today in Real Clear Markets, however, Gerald O’Driscoll notes that monetary policy is not the answer to many of the economy’s biggest problems, perhaps most notably the ever weaker labor market. As he goes on to state, “it is hubris to claim the Federal Reserve can control variables, like the unemployment rate and labor market weakness, over which they have no systematic influence. But Fed policy is not just ineffective; it is malignant.”

Bad monetary policy, coupled with factors such as Obamacare and self-perpetuating unemployment figures, continue to harm the economy and slow growth overall. As O’Driscoll reminds us, “the main effect of Fed policy has been to create asset bubbles in financial markets” and unfortunately for us, “overheated asset markets are not a source of strength – they the source of future problems.”

To read his article in its entirety, click here.