By John Tamny of Forbes
The Fed’s latest minutes make plain that there’s ongoing support within the central bank for quantitative easing. This is naive. Much like the 1930s, banks are presently awash in cash, and a major reason they’re not lending has to do with demand for loans being low. The result is that much of the alleged “money supply” created by the Fed is gathering interest there. Contrary to popular belief, the Fed can’t increase money in circulation, but productive economic activity can. And so long as producers are nervous, Fed attempts at ease will be superfluous at best, dangerous at worst for the central bank continuing to distort the real cost of credt.
