In the past several years, there is much discussion by the medias’ financial pundits and prognosticators as to what the Federal Reserve will do regarding interest rates (federal funds rate) after the 2016 presidential election. This speculation is troubling in itself as it hints of political shenanigans by the Federal Reserve. Rates have been at historical lows since 2008 as one can see by the chart shown below. One could ask the question what has this blatant manipulation given the average American? Not much in terms of rising incomes and increased productivity however the equity markets and other malinvestments have prospered.
How about an entirely different model. Dissolve the Federal Reserve and let banks and other lending institutions lend money based upon free market forces. Interest rate discovery will then be driven by complex market forces which would cause interest rates to rise and fall as the demand for credit increased or decreased. In this free market model, the invisible hand would protect our economy from artificially inflated bubbles and the corrupt politics of the ruling statists.