‘Cheap money’ vs. capitalism

By Ed Dornlas, Las Vegas

Tuesday, Jan. 20, 2015 | 2 a.m.

The problem with central planning an economy as opposed to letting capitalism work without hindrance is the unintended consequences. The Federal Reserve is our central bank and is actively planning our economy. Their goals are full employment, just the right amount of inflation and stable money. In the service of those goals the Federal Reserve has unleashed trillions of dollars of cheap money on the banking system. That money has gone to try to inflate the economy. It has allowed cheap loans, which have in turn boosted the auto, housing and stock markets. The effect of cheap money is to bring forward goods for which there is not a current demand. For instance developers can find funding for projects for which there is little or no current demand like retail space. Another area where the central bank’s cheap money has had an effect is in the production of oil and natural gas. Where new drilling, fracking and exploration may not have been feasible when money was more expensive, thanks to the central bankers, production of petroleum products in excess of demand was made possible, and now the world is apparently awash in oil. The excess supply has cut the price of a barrel of oil from its recent high of about $100 to a current price of about $50. The unintended consequence of cheap gas is a boon for the American consumer but for governments like Russia, which have grown to depend upon the old price of oil, not so much.