“Monetary policies that are pumping out easy money will end in tears, Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute, wrote in an article for MarketWatch.
Last week, Federal Reserve Chairman Ben Bernanke expressed his continuing belief in the policies he has put into place.
“We believe the monetary policies we have conducted have helped get stronger recovery and more jobs than we otherwise would have had,” Reuters quoted Bernanke as saying.
Furchtgott-Roth, who was chief of staff of President George W. Bush’s Council of Economic Advisors, explained that what the Fed policies actually do is create record-low interest rates. That encourages investors to take higher risks. Meanwhile, there is little incentive for banks to help the masses because low interest rates make lending unattractive.
Such conditions are not the way to lead the country’s economy back to health, according to Furchtgott-Roth.
There is a growing crowd who insist that the Fed cannot suppress interest rates forever, and when they do, she foresees a lot of “tears and regrets.”
If Americans are concerned about national debt now, they will really have something to cry about. Higher interest rates will increase public debt, and therefore deepen the deficit.
Furchtgott-Roth noted the value of the high-risk investments that people are flocking to will decline when interest rates rise. And older people are expected to be especially hurt by that fall.
“We’re in the biggest mess we’ve been in since the 1930s,” Allan Meltzer told Furchtgott-Roth. “We have never had a more problematic future.” …”
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