Mises Daily Friday: Bernie Sanders Criticizes the Fed for the Wrong Reasons
Bernie Sanders’s advice on fixing the Fed demonstrates the fact that being “anti-Fed” is not enough. One must not just be a critic of the Fed. One must also know what the Fed is doing that is bad, and what the better solution would be. Unfortunately, those of us who think that the Fed has been an engine of trouble in the US economy over the last many decades are sometimes lumped together with socialist critics of Fed policy. But the free market approach to money and banking has nothing in common with Bernie Sanders.
Sanders took to The New York Times last month to lament that the “recent decision by the Fed to raise interest rates is the latest example of the rigged economic system.” Now, perhaps it is true that the decision by the Fed is an example of rigging the system. But it is only true in a way that Sanders never intends. For Sanders, it is the suppression of interest rates that should be the goal, not their being raised. But in fact, both raising and suppressingthe rates of interest is, by definition, rigging the economy.
Interest rates function in an unhampered market as a result of the interaction between creditors and debtors, capitalists and borrowers. It is the effort to change the interest rate either up or down away from the market rate of interest that constitutes a system being “rigged.”