The Federal Reserve controls the economy by controlling the short-term interest rates that banks charge each-other to lend money overnight to meet their legal reserve requirements. This is because banks have to have a certain amount of money on hand in order to be able to cover the amount they claim they can cover as required by law. So if rates go up, everybodys interest goes up, reducing buying power and making people not want to spend money. Less jobs, less spending, slower economy. Why would they do this? To prevent wages from going up, which would raise prices, which would lead to inflation. Who feels the hit? Middle and lower class Americans, especially uneducated ones. So I wonder, why not lower those rates, prevent prices from increasing, and make the companies take a relatively small hit when compared to the average Joe? The hit they take would only be lost POTENTIAL profit anyway, and they would be making more money because people would have more money to spend. This coupled with reducing the national debt, and the reducing penny printing ought to make a nice dent in the economy slump. I would think so at least.
Posted on: Mon, 03 Feb 2014 14:05:19 +0000
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