We are now living in a post-ZIRP world. On Wednesday, Janet Yellen announced that the Federal Reserve will increase the target Federal Funds rate from 0.00-0.25 percent up to 0.25-0.5 percent. While Wall Street approved of the move, Ryan McMaken notes, “The fact that this is being labeled such a large change underscores just how fragile the current economic ‘recovery’ is.” Indeed, the new Fed target would itself have been unprecedentedly low if it had occurred prior to 2008. Bottom line, the Fed still hasn’t learned its lesson on interest rates.
What does this mean going forward? Well, while Austrians have long been calling for higher interest rates, the Austrian business cycle theory makes clear that any transition to what was once considered the monetary status quo is likely to cause economic pain. As Robert Murphy illustrates in his response to advocates of Market Monetarism:
[A]fter a credit-fueled boom, the precise timing of the crash will probably occur when the central bank “tightens. … Ultimately, the only way to prevent painful busts is to
Mises Weekends this week features a lecture from Dr. Murphy on what makes the Austrian approach to economics stand apart: its focus on human action.
It’s this foundation in methodological individualism that has made Austrian economics an indispensable part of a consistent defense of liberty. If you’re interested in building upon your understanding of praxeology and the economic insights of Menger and Mises, this is an episode you won’t want to miss.
And in case you missed any of them, here are this week’s featured Mises Daily articles and some of our most popular articles at Mises Wire:
- Why Doctors Are Entrepreneurs by Dr. Michel Accad
- The Dreary Utopia of the Socialists by David Gordon
- Ludwig von Mises Is Winning by Tho Bishop
- Did “Tight” Fed Policy Cause the Financial Crisis? by Robert Murphy
- Technology and Government Shouldn’t Mix by Benjamin M. Wiegold
- No, There’s No Economic Case for the Minimum Wage by Per Bylund
- Are Entrepreneurs Naturally Talented, or Just Hard Workers? by Matt McCaffrey
- The Diabolical Side of ZIRP by Mark Thornton
- Mises Institute Ranked 9th Most Influential US Think Tank
- Mises Brasil Parabéns Pelo Trabalho Bem Feito! by Joseph Salerno
- True Money Supply Growth Rises Slightly to Eight Percent in November by Ryan McMaken
- Ludwig von Mises is the Most Searched Economist in Brazil by Tho Bishop
- The Fed Still Hasn’t Learned Its Lesson on Interest Rates by Troy Vincent
- Students Forget About Keynes In The Summer by Jonathan Newman
- With Few Gun Laws, New Hampshire Is Safer Than Canada by Ryan McMaken
- The Stock Market Reacts to the Fed’s Interest Rate Hike by Randall G. Holcombe
- Fed (Slightly) Raises Target Fed Funds Rate After Seven Years by Ryan McMaken
- SEC Approves Patrick Byrne’s Plan to Issue Stock Via Blockchain by Tho Bishop
- The Absurdity of Negative Interest Rates by Paul-Martin Foss
- Cato on the Basic Income by David Gordon
- Martin Shkreli To Learn a Hard Lesson? by Ryan McMaken
- The Bill of Rights: The Only Good Part of the Constitution by Ryan McMaken
- The Fed Can Do Real Damage Without Even Trying by Jonathan Newman
- So Much for “Rules-Based” Policy at the IMF by Paul-Martin Foss
