Chris Goodrich

It has typically been the monetary policy of the Federal Reserve to cut interest rates to inspire borrowing and thus grow the economy, but what happens when it doesn’t work?  We change the target of course!

In a typical economic downturn, lowering interest rates can help relieve some pressure and create the growth that the economy needs, but the United States is now in uncharted territories; 0% Fed Funds rate.  Will it work?  We will see, but it’s not very likely.

Japan experimented with 0% interest rates from 1999 to 2006.  It took 7 years to recover from that downturn.

The problem with a 0% interest rate is that there is no incentive for the bank to loan out money.  Of course, everyone wants to borrow at 0% interest, but nobody wants to loan at 0% interest.  Of course, the Fed Funds rate will never truly hit 0%, but it will inch closer and closer to 0% where there will be fewer and fewer loans made.

It’s a necessary move, but it’s not likely to make the difference we need to bring us out of this recession.

I am convinced that we need a turnaround in the fundamental belief in the strength of our economy, a renewed spirit of consumerism dictating that we spend and earn wisely and without greed.