Cape Gazette readers deserve a better story than what Geary Foertsch gave (Oct. 3) on Fed policy, debt, and American economic well-being.
To cut to his chase, libertarians all hate: 1) the Fed, 2) anything "government," and 3) anything you can pin the label "monetary socialism" onto. Foertsch used all of one-third of his column lines to quote from three self-promoting, self-aggrandizing soap-boxers who make their money from (probably) book sales, speeches, advice fees, radio programs and (probably) little or none from investing. So, I would like to tell about some of the parts of the story that Foertsch left out.
Foertsch explained the bad side of inflation, but left out the good side. Depending on details, a house you buy today will sell, decades later, for much more than what you paid in for principal, interest, tax, and maintenance. Net result: a home for much less than rent (and rent may increase on lease renewal and you won't get any of it back).
Foertsch also said that it is "the Fed...that actually creates more money and causes inflation." This, by itself, is not correct either. Most money is "created" by banks that take deposits and make loans. Look up "money supply" and "fractional reserve banking" on the internet.
"Wealth creation"- a popular term in financial circles - also has nothing to do with the Fed.
Corporations "print" stock shares on paper and corporate bonds on paper and people readily buy them. People get the paper, corporations get the big bucks, much of which goes straight into executive wallets. Stock price increases come to stock owners without them doing any work. At maturity, bonds pay you back principal and interest which is, also, a magnification of "money." How come Foertsch doesn't complain about that?
After that, Foertsch presents a vague discussion about the Fed "easy money" policy. Foertsch said it was bad policy. He leaves out three significant details. First, central banks (like the Fed) exist in almost all the countries in the world. You can't live without them.
Second, following the 2007-08 Great Recession, most if not all of the central banks carried out "easy money" programs and the consensus was that the world economy recovered faster from this.
Third, the low interest payout was a shrewd counter-action to China's "cheap currency" policy, and China's cheat on us got cheated back on. Sure seems pretty good to me. And, it was all explained over the years in many articles in the Wall Street Journal and the Financial Times.
As a benefit to Gazette readers who want to really learn about money, the Fed, how it came into existence (spoiler: it was dreamed up by rich people), and the ugly dark side of money, I suggest the excellent and easy-to-read book "The Creature from Jekyll Island" by G. Edward Griffin. My only reservation is about the conclusion, but the rest of the story is outstanding and I learned a lot that I didn't know before.
Arthur E. Sowers
Harbeson
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