If the free market set interest rates without any regulation, we'd be constantly vulnerable to market forces with little or no means or mechanism to stop or avert anything from runaway inflation to another great depression. Do you really want an uncontrolled and uncontrollable economy? PUH-leeze. That kind of pure capitalism works only for those at the very top, and at the expense of everyone else. India is a MUCH purer capitalist economy than ours. Is that a model you really want to follow?
And thank you for providing the source. Perhaps you should look at him a bit closer.
Jeffrey Sachs' economic theories have been put into action in several countries whom he advised in making the transition from a centralized market to a free market, so he's a rare bird in economics; someone whose ideas have actually had real world testing.
The result of his unregulated economies? On the success side, hyperinflation was reigned in, and GDP rose dramatically. On the other hand, though, unemployment, numbers of people living in poverty, and the depth of that poverty, all skyrocketed as did crime rates and class violence, while the average standard of living fell drastically.
IOW, the rich got VERY rich, the middle class got poor, and the poor got VERY poor.
I'll say it again, an unregulated economy benefits those at the very top, at the expense of everyone else.
Is that the model you want to follow? I mean, it didn't work out so well in Poland, or Bolivia, for two, so do you really want to do it here?
But getting back to his argument in THIS situation, Sachs is blaming the wrong cause in order to further his larger argument against the Fed. But it's a fallacious argument. Arguing that the Fed's power to set interest rates was the cause, instead of the bad business practices practiced by the credit industry, is like blaming the victim of a robbery for having too much cash on hand instead of blaming the robber who took it! Or perhaps, blaming the bank that let the victim withdraw so much money.
The credit industry robbed consumers by giving them loans they knew the borrowers didn't qualify for and couldn't pay; they robbed other creditors whom they sold the loans to; they robbed their own stockholders when they overvalued those loans and disguised their worthlessness; and if they get bailed out, which we pretty much have to do, they will be robbing the taxpayers, too. And it's the robbers at fault for a robbery.
The fault attached to the government is that they could have, and should have, monitored and regulated them closer, and thus prevented it. ANd a few decades ago, they were doing that. So I guess you could say that's like having a cop watching you get robbed, and doing nothing. The robber's still responsible, but the cop failed to do his duty. The government has a responsibility to protect the public
through regulation, and didn't.
