This morning I read Fed Should Raise Rates To Loosen Policy by David Malpass a contributor for Forbes.
The Fed does need to increase its interest rate. The current near zero percent interest rate does benefit the rich and makes lending to the not-rich difficult. It seems that David is implying that the Fed should have never implemented the near zero percent interest rate in the first place or implemented quantitative easing (QE).
Though I agree with David that the Fed could have done more during the financial crisis to help the people actually hurting — the middle class and the working poor — I do also believe that the Fed’s actions did help release some of the pressures.
With the dismissal of the Glass-Steagall Act, we were building up to a great economical disaster. Lowering the Fed’s interest rate to near zero and holding long term government bonds helped keep many businesses alive. Imagine what would have happened if the Fed hadn’t implemented such policies. We probably would have ended up with The Great Depression II instead of just a recession.
This financial crisis hit so many people. Many people lost their jobs. Many people lost their homes. Many people lost their life savings — if not during the bubble burst then in attempting to support themselves in between jobs. It was a horrible time.
Imagine what would have happened without the Fed’s actions? How many businesses would have went under? How many more people would have lost their jobs? How many more people would have lost their homes. The Fed’s actions did help prevent an even worse disaster. More could have been done to help the masses. More can still be done to help us. Less can be done to benefit the rich, especially the uber rich.
This is why we should all support an increased minimum wage. The minimum wage was created in order for a SINGLE income to provide a living wage to a single income family.
If your argument is that of the above false quote, you are forgetting that minimum wage jobs don’t go away once school is in session. Jobs are for adults. If a teen gets a job so that he or she has spending money apart from what the parents are capable of supplying, GREAT! But don’t forget, jobs are for adults. Adults do adult things — like purchase transportation, shelter, insurance, food, healthcare services, and more.
First off, classical economics in a nut is laissez-fair or “leave it alone and it will be fine.”
Up until the 1920s, recessions were more or less manageable. Perhaps not for those greatly affected, but society at large. Of course, the infrastructure of our society at the time could not have supported large government interference.
At the time, small communities were “thriving.” Everybody new their neighbor and few people moved far off from home upon reaching adulthood. Mothers made clothes for their family. If yoy hit hard times you could count on your community to lend a helping hand or at least provide small jobs so you could support your self.
At the turn of the century, society began to change. More and more people were moving to the city. We new fewer and fewer of our neighbors. It is my belief that this is where our roots of “support yourself you lazy bumb” really started to take root.
That’s why classical economics failed. People wanted more and more of the economic pie. Since people of power had the power to take what of the pie they wanted, they did. Since there was less pie to go around, the less powerful people had to borrow money in order to participate in the economic (false) boom of the time.
People of power no longer felt that they were accountable for the wellbeing of others because they weren’t around those of a “lesser” status. Had we continued to have the tight knit community we had before, powerful people would have been held more accountable.
Observations of society will show you that people of a higher social standing do not hold themselves accountable to those of a lower social standing. Bell hops for the most expensive apartments in Manhattan will tell you that most of the residents will only tip a few dollars (if that) because the residents know that amount is what would be expected at the lowest apartment buildings that still have bell hops.
Studies have shown that people who begin with an adherently better position believe they earned what wealth follows amd that those who started in a disadvantaged position deserve what poverty follows. Don’t believe me?
Check this link out: monopoly study
I am not saying that before the 20th century there were not greedy people. I am saying that there have always been greedy people and that as our society expands it becomes more and more difficult to hold (greedy) people of power accountable for taking care of their share of society. That is why classical economics has failed and why we now need keynesian economics. That is why we need a minimum wage. That is why we need regulations. Too many people will only give the bare minimum they are required to for society and they will take the rest.