It’s Not Policy…It’s Just Inevitable

Ron Paul again, railing on the Federal Reserve and interest rates. Click Here.

I like Ron Paul. He’s a lot more honest than your run-of-the-mill politician, but I’m glad he is not in charge of the country’s finances. Just the same way I am glad it was Hamilton’s vision of banking rather than Jefferson’s that carried the day.

In the case of the Fed and interest rates, Ron Paul continues to get the causality confused. He thinks interest rates are low because of the Fed. In a small way that is true, but he is missing the larger picture. Fed policies are not creating current economic conditions. Rather, policies are accommodating conditions that are inevitable. These conditions being those that are created by the demographics of the Baby Boomers.

At some point in the future interest rates will probably creep up and the economy will be bumpy. They will blame Fed policy for this. The reality is that the economy will inevitably be bumpy when you have a large portion of the population (the Baby Boomers) leaving the workforce and ceasing to be productive. Interest rates would also rise as they convert savings into consumption.

There is no government that can alter that reality unless, I guess, someone invents a time machine so the Baby Boomers can work forever.