Here's the article he posted:
"As a free-market loving individual, it pains me to see so many of my fellow travelers claim the Fed has artificially suppressed interest rates since the onset of the crisis.....
What I wish George Will, Bill Gross, and other free market advocates would consider is the possibility that the Fed itself is not the source of the low rates, but simply is a follower of where market forces have pushed interest rates. That is, the Great Recession and the prolonged slump that followed caused interest rates to be depressed and the Fed did its best to keep short-term interest rates near this low market-clearing level.
But there is more to this story. The crisis was so severe that the market-clearing level of short-term interest rates was pulled down well below 0%. That is a natural consequence of the sharp collapse in business and household spending. The Fed, however, cannot push short-term nominal interest rates very far past 0% because people would start hoarding cash rather than earn negative interest. So instead it was forced to keep short-term interest rates near the zero lower bound (ZLB) while the actual market clearing interest rate level slowly worked its way back up toward zero as the economy healed.
The irony of this is that the free marketers of the world, like George Will and Bill Gross, should be sympathetic to this story. They believe in the power of prices to clear markets so they should be open to the possibility that sometimes--in severe crises like the Great Depression or Great Recessions--interest rates may need to go negative in order to clear output markets. If so, it is incorrect for them to ascribe the low interest rates to Fed policy since it was simply chasing after a falling market-clearing interest rate level."
My first thought is that if interest rates need to be negative to clear the markets (which I doubt), then no one should be loaning money. If he's supposedly a free market guy then the he should realize it's not the government's job to stimulate the loan market. Maybe that's the free market's signal that there's too many loans and we need to stop loaning money until the debt is under control.
Also I posted a whole list of artificial things besides the Fed that are driving down rates. Like guaranteed loans and supply from foreign banks. Given how desperately the government want to keep rates low there's probably some other things that I haven't even thought of. I just thought of another one. Underreporting the CPI.
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