It seems to me that all the fuss yesterday about the Fed’s $200 billion dollar “loan” – I’m sure you’ve all heard about it so I’ll skip the details – was completely uncalled for. Since when does the Fed pumping more money into the economy not equal an increase in inflation? Think about it – whenever the Fed does anything with the funds that it is holding, that translates to there being more money out in the economy. When there is more money out in the economy, there is inflation. That’s pretty much by definition.Â
Lately I have been less and less happy with the Fed. I understand that many people would like to see the bank do something when the market falls, but really the best thing they could do is to do nothing. Let the market determine interest rates and the business cycle will correct itself more quickly. It is when the government and the Fed start messing with things that the cycle is slowed down due to the time it takes for these things to take place or amplified altogether because of the same reason.
 Now that my little rant is over, I’ll open this up for discussion. I admit that I’m a Finance major and not an Economics major. That means that I know how to value investments. I don’t know all I could about monetary policy. But there may be some out there who do. If you have a strong opinion about the Fed’s actions – whether you’re an economist or not – feel free to post it as a comment here. I’d love to hear what you all think about this.
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