May 13, 2015 Print

Photo Credit: DonkeyHotey

The monetary policies set by the Federal Reserve have far-reaching implications for market activity throughout the economy, and the zero-interest-rate policy that the Fed has pursued during the years since the recession has brought a wide array of negative unintended consequences to bear. In an analysis for The Hill, Atlas Network Senior Fellow Judy Shelton explains why the Fed’s ongoing failure to reach its own projected stimulus goals calls for increased accountability and oversight.

“Something is wrong,” Shelton writes. “The monetary stimulus theory behind zero interest rates is not playing out in reality. Where's the economic growth? This mystery will not be solved by former Fed prima donnas refusing to acknowledge that American citizens and their representatives in Congress have every right — indeed, Congress has a constitutionally mandated responsibility — to call to account those who have been appointed to the task of regulating U.S. money.”

Shelton goes on to explain how the proliferation of new banking regulations during the past few years has practically halted the opening of new banks and the issuing of loans to traditional hometown banking customers. Federal Reserve policy also provides a strong incentive for banks to hold excess reserves instead of making loans. This leaves the productive center of the economy — ordinary entrepreneurial Americans — continually stalled.

“So in crafting its monetary strategy to stimulate economic growth, it seems the Fed has given short shrift to the middle-income Americans who fuel the private sector — the true engine of productive economic growth,” Shelton explains. “How much has consumer demand decreased because personal savings accounts pay zilch? How much has employment and production suffered because entrepreneurs can't get loans from their local banks?”

Read Shelton’s full analysis, “Reckoning for the Fed,” at The Hill.

Learn more about Atlas Network’s Sound Money Project.