My letter today in The Record

14 Jul

No reason to cut rates just now

Regarding “Powell signals rate cut could be coming soon” (Page 16A, July 11): This article reveals that the Fed chairman, Jay Powell, may be caving in to President Trump’s call for “easy money” as he heads into the 2020 presidential campaign. Thus, the Fed’s much touted “independence” is in question.

Every president running for reelection wants a robust economy, so the voters can go into the voting booth and pull a lever for the incumbent. However, easy money gives a short-term boost to the economy that always ends in tears — higher inflation, recession, bankruptcies, and increasing unemployment.

The most egregious example

of a president coaxing a Fed chairman to open the monetary spigot occurred nearly a half century ago, when President Nixon wanted a strong economy, in 1972, to ensure his reelection. The Fed induced boom ended in the bust of 1973-75.

There is no justification for lower interest rates at this stage of the business cycle, which is caused by the Federal Reserve’s manipulation of money and credit. Instead, the Fed should leave interest rates to the financial markets, allowing supply and demand to set interest rates.

In addition, Chairman Powell asserted in his congressional testimony that a return to the gold standard would be harmful to the economy. On the contrary, a return to the gold standard would end the decline of the dollar’s purchasing power; eliminate the manipulation of interest rates and the redistribution of income from low and middle-income families to the 1%.

Murray Sabrin, Ph.D.

Fort Lee The writer is a professor of finance at Ramapo College and founder of the Sabrin Center for Free Enterprise.

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