Loose Money Follies

The Federal Reserve has been keeping interest rates low and inflating the currency, to bail out irresponsible people who’ve borrowed more than they can afford, and encourage consumers to spend like there’s no tomorrow.  Now, the chickens are coming home to roost, and the Fed’s policy is finally attracting some criticism.   In the Wall Street Journal today, there are columns entitled “We’ll All Pay for the Fed’s Loose Money Follies,” and “How Low Interest Rates Contributed to the Credit Crisis.”

Earlier, Stanford Professor Ronald McKinnon criticized the Fed’s inflationary interest-rate cuts, noting that it has cut investment in the U.S., causing a “credit crunch” and “flight from the dollar” as “capital flies out of the country.”   International confidence in our economy has fallen greatly as a result.

Economists have also criticized the mortgage bailout legislation passed by Congress.