by Dr. Ron Paul
Ron Paul Institute
Last week, the Federal Reserve responded to Wall Street’s coronavirus panic with an “emergency” interest rate cut. This emergency cut failed to revive the stock market, leading to predictions that the Fed will again cut rates later this month.
More rate cuts would drive interest rates to near, or even below, zero. Lowering interest rates punishes people for saving, thus encouraging consumers and businesses to spend every penny they make. This may give the economy a short-term boost. But, it inhibits long-term economic growth by depleting the savings necessary for investments in businesses and jobs. The result of this policy will be more pressure on the Fed to indefinitely maintain low interest rates and on the Congress and president to create another explosion of government “stimulus” spending.