The Federal Reserve, the source of much of our financial woes, has not raised interest rates since 2006. Think about that for a minute. The last time the Fed actually raised the interest rates some of the young people entering internship positions at the Fed or other financial institutions were in middle school. Do the money masters at the Fed really think that near zero interest rates are where they really should be at? I for one do not.
The real question to ask here is why does a committee in Washington D.C. even have the power to determine what interest rates are? All other prices, in a free economy, are determined by the interplay of supply and demand within an economy. Why don’t we have a committee in D.C. that determines how many shoes there should be? We don’t have that because it is almost universally agreed that such a thing would be a disaster and the amount of shoes would never be the right amount. Either there would be shortages or there would be radical oversupply. Why do we know this, because it was tried. In the former Soviet Union every commodity of life was set in quantity for every part of the society. The result? Some cities with too many shoes others with too few, and all the while some places starved with others had plenty of food. The ability of a central commissar to determine the proper supply of any thing whatever is known today to be absolutely nonexistent.
So why do we still have a central bank that determines the interest rate? The answer is that some, bankers, benefit from the arrangement. Low interest rates encourage borrowing, and borrowing is how bankers make their money. Knowing this is it any wonder now to you why the Federal Reserve, which is owned by the banks, cannot find the wherewithal to raise the interest rates, even after nearly 15 years?