September 11, 2014 – This edition of the bimonthly column covers the wild idea concocted by the Council on Foreign Relations and printed in the journal Foreign Affairs: give the Federal Reserve the right to distribute “the money it prints directly to the people.” The title of the article is “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People.”
From the article:
“The Federal Reserve has already created trillions of dollars at the printing press, most of which ended up as bank reserves on deposit with the Fed.
“Why isn’t that money being used in the economy making loans, funding new and expanding businesses, and creating jobs?
“Because under the prevailing conditions of malinvestment and distorted credit conditions, capable borrowers are not lining up to take out loans. Why should a business expand its plant and add to its employment when it can’t sell what it can produce with its existing capacity?
“Why expect a business to borrow more when its existing debt is too great? Why would lenders willingly make loans to borrowers who may not be credit worthy?
“The distortion caused by the Fed’s interference with interest rates has concealed problems in the economy, and even enabled marginal and otherwise failing business to limp along a while longer thanks to artificially low rates. Many of them will fall by the roadside when rates rise, succumbing to real market conditions.
“In other words Fed policies have prevented the liquidation of bad debt and clouded real financial conditions.
“Much of the economy is operating in the dark.”