The Federal Reserve Suffers From A Fatal Conceit And Our Economy Is Paying The Price
The post The Federal Reserve Suffers From A Fatal Conceit And Our Economy Is Paying The Price appeared on BitcoinEthereumNews.com.
Federal Reserve Bank Chair Jerome Powell. (Photo by Chip Somodevilla/Getty Images) Getty Images The Federal Reserve suffers from a fatal conceit, and our economy is paying the price. As expected, at its meeting this week the Federal Reserve did nothing regarding interest rates. President Trump, before and after that decision, blasted Fed head Jerome Powell. Trump critics say he’s jeopardizing the central bank’s independence. All this, however, obscures a huge question: Does our central bank know what it’s doing when it comes to inflation? The answer is, no. The Federal Reserve is doing more harm than good. The world’s most important central bank is afflicted with what the late, great Nobel-winning economist Friedrich Hayek called “the fatal conceit,” the idea that government planners can run the economy better than the free market. They never have, no matter how brilliant the planners were. Markets are people, and around the world each day they make billions of decisions to buy, sell, invest, start a business, close a business and whatever. People aren’t machines. Intrusive governments distort economies. Hayek’s profound insight applies to the Fed. Our central bank isn’t running the economy the way communist and socialist central planners do. However, the way it conducts monetary policy is based on the patently false premise that to control inflation it must deliberately try to stimulate or depress economic activity. Fed officials falsely believe that prosperity causes inflation. On that basis, when prices rise, the central bank attempts to slow the economy or even engineer a recession. When things are sluggish and prices aren’t rising so much, it aims to lower the cost of money. The Fed’s preferred instrument for this kind economic manipulation is, indeed, interest rates. What’s amazing is how blandly accepted the idea is that the Fed should have the power to…
Filed under: News - @ June 19, 2025 10:27 am