The Federal Reserve is comprised of economic “interventionists” who ostensibly manipulate the money supply and interest rates for the betterment of the economy and the prosperity of the American people. In reality, the Fed’s monetary manipulation causes severe distortions in the economy that benefit a select few while harming a large swath of Americans.
The interventionist Fed, which claims that there’s a tradeoff between inflation and unemployment, often promotes the former. Modern U.S. economic history, however, demonstrates that high unemployment can occur during periods of high inflation. The 1970s was a decade of stagflation, a period when the unemployment rate was stuck in an elevated range of 6 to 8% while the inflation rate consistently hovered above 6%. During the bubble/burst economic paradigm we’ve experienced since the late 1990s, a period that’s seen tremendous price bubbles in stocks, housing, energy, and commodities (which benefit the wealthy), unemployment and underemployment rates have been stuck in a permanently-elevated state north of 5% and 15%, respectively. Much of the decrease in the unemployment rate since the post-Great Depression peak of 10% in 2009 can be attributed to a record number of Americans dropping out of the labor force, a negative development.
(Note: these data are provided by the Bureau of Labor Statistics, which, in the 1990s, changed the way it calculates unemployment and underemployment. Using the calculations the BLS employed before the change, we see that the unemployment rate actually peaked around 13%, the unemployment rate higher than 20%. Gallup corroborates these numbers.)
The unemployment rate never returned to its pre-tech bubble level during the 2000s housing bubble, a period when home values doubled in some U.S. markets. During the last 6 years, a period in which the Fed has printed more than $4 trillion and has kept interest rates at historic lows, the unemployment rate hasn’t come anywhere close to returning its pre-housing bubble level (which, again, was higher than its pre-tech bubble level). However, the stock market has more than doubled, and the prices of energy, housing, and many other assets have increased significantly during this time.
The interventionist Fed’s policies aren’t just failures, they’re immoral: They disproportionately harm those of fewer means while enriching those with more. The young and the working poor are disproportionately harmed by increases in unemployment in the wake of Fed-inspired asset bubbles, and those who live paycheck-to-paycheck–or have no job at all–are disproportionately harmed by rising prices during asset bubbles. Holders of large quantities of assets, on the other hand, benefit significantly from them.
Interventionist Fed policies, which rob the poor to pay the rich, must be stopped.
Seth Mason, Charleston SC
