Flag it all you want, the writer is correct in their assertions.
ZIRP was an acceptable solution to the problem faced at the time. Its detractors rightly pointed out all the harms that would come from it, especially if it was left in place longer than necessary - and they’re all essentially vindicated in hindsight. Still, it got us out of the immediate hole by kicking the various problems down the road a bit in the hope that regulators and Congress would fix the issues permanently in the long run.
Obviously that didn’t happen, because when you give rich people and their asset managers free debt and government bailouts with no strings attached, they understandably don’t share the wealth (they wouldn’t be rich if they shared, after all). So the best we can do now is simply refuse to return to an era that exacerbated rampant speculation and irresponsible investing into burrito taxis, because we know the harms it will cause.
I also appreciate the callout of the opposing sides that are the present stock and bond markets. Stock market boosters see no end to the good that comes from ZIRP because they don’t ever have to worry about the ten-year outcome when they hold a position for less than a decade; bond holders, on the other hand, absolutely have to worry about these outcomes, and we’re seeing their anxiety in sectors with outsized exposure to bond yields - like the insurance industry dropping customers and raising premiums to offset record property valuations in areas overly exposed to climate change and disaster risks.
Viewed through that lens, and it’s the equivalent of a Doctor warning the patient that if they don’t start exercising and eating healthier today, they’ll be dead in a decade - and the patient figuring that’s tomorrow’s problem, then fucking off to McDonald’s for a large combo meal and a sundae.
It seems to me the assertions are mostly junk. Just from the title:
>The Stock Market Is Selling Its Soul and the Fed’s Independence to Trump Because ZIRP Broke The World
"The stock market doesn't have a soul" - it's a market where you can buy and sell equities which have done for some decades
"Fed’s Independence to Trump Because ZIRP Broke The World" - I don't think so. Trump is bullying the Fed because he wants to print money to compensate for his dumb tariffs.
"ZIRP Broke The World." Well, it caused problems but it would make almost as much sense to say I put on three pounds last week because ZIRP Broke The World. Cause and effect don't really line up.
I'm sorry, but is one of your honest arguments: well actually "the stock market doesn't have a soul"?
Fun fact, neither your parent nor the person who wrote article thinks the stock market has an actual soul.
(fwiw: this comment should not be construed as me agreeing with the article. I really don't have enough knowledge to even kind of consider it's veracity)
Presumably it was flagged due to the inflammatory nature of the article and the inevitable political posts (like this one I'm now responding to!) that would result.
For the record, the Fed did raise interest rates before COVID-era financial policy kicked inflation into high gear (this is the origins of Trump's ire for the Fed, because he generally wants to keep rates as low as possible while he's in office to juice economic growth), but backed off somewhat because the economy was not doing well and inflation was not the primary concern.
Your doctor analogy does not seem to show much understanding of how the stock and bond markets work or the insurance sector works.
Presumably also a little bit because sites like this are owned by VC capital that stand to gain or lose a lot on ZIRP policies, and have an unflagging belief in their infallibility - as well as many users here's income depending on startups backed almost entirely by VC funds. I also fail to see how the post you are responding to is political.
It's difficult to convince a person of something when they are paid not to understand it.
Also amused that ZIRP is permitted to be discussed freely in the context of VC funding rounds and its benefits on startup growth, but any sort of detraction or critique of its monetary policies is immediately flagged. If I had a tinfoil hat, I’d be inclined to make some claims as to why that might be, here.
I am also amused at the glut of anons happy to say I’m wrong in how something works, yet conveniently neglect to explain how I’m wrong or provide the “correct” perspective to have. At this point in my eTenure, I just assume that anyone saying I’m wrong but refusing to articulate the how/what/when/where/why of it are, themselves, actually wrong, otherwise they’d posit a counterargument instead of a drive-by “you’re wrong lol” and a downvote.
If? You can believe what you want, but dang and the other mods have said repeatedly that their owners are completely hands off. If you want to argue that the mods know where their bread is buttered and act accordingly, have at it, but don't pretend you aren't creating a (meaningless in the grand scheme of things) conspiracy theory.
> I am also amused at the glut of anons happy to say I’m wrong in how something works, yet conveniently neglect to explain how I’m wrong or provide the “correct” perspective to have. At this point in my eTenure, I just assume that anyone saying I’m wrong but refusing to articulate the how/what/when/where/why of it are, themselves, actually wrong.
It's a waste of time to argue with someone who is convinced they are right about something with zero evidence supporting their position. So again, believe what you want, but be aware of what you're doing.
Website moderation and discourse usually if not always reflects the values and beliefs of the people that own it. They don’t even have to be directly involved for this to be the case - but it’d be really silly to say this site doesn’t take a particular slant in favor of the people that own it. Whatever the cause that may be is of course a matter of debate, but pretending it doesn’t exist is silly.
These critiques of zirp never explain what should have been done differently.
It's very unlikely the Fed kept rates too low because inflation didn't exceed 2% for 12 years from 2008 to 2021. If the Fed had actually made money "too cheap" inflation would have kicked in much earlier.
More likely, we made it very hard to do new stuff in the country, which made the value of borrowed money low.
Congress spent decades adding regulations (often for good reason) that ultimately resulted in it being too expensive to do most things inside the US. If a business is banned from investing in most new things, it won't need to borrow more money.
The Fed just responded to the market's appraisal of money value. You can even see this in the long term charts - interest rates declined almost continuously from 1984 to 2022.
The entire time, inflation stayed at or below 2%. If the Fed had kept rates higher, theory would predict they would have caused a recession (and Scott Sumner has spent more than a decade arguing this is actually what caused the long deep recession of 2008 - money was too expensive, even at 0%).
Ultimately money is neutral in the long run. The things that truly matter for growth are laws, culture, natural resources and education. These are the causes of our present social dysfunction. These are the issues we should focus on fixing. Not fiddling with interest rates.
The Fed could have instructed Congress to tax any growth in retained or dividended profits in excess of the annual Fed inflation target. ‘Pay more wages or charge less money’ is a direct lever over inflation, even after a partial reduction in overgrowth penalty tax is granted for research spending, and isn’t prone to causing deflation. Sadly, they don’t consider this lever in-scope for economic policy, and as far as I know they didn’t even try (and so Congress had no opportunity to consider, refuse, or ignore their request).
Do you have an example of other times the Federal Reserve has lobbied Congress to adopt a policy?
The closest I could find by searching "federal reserve asks congress" was Fed Chair Jerome Powell asking Congress to clarify the legality of marijuana[1].
I think the Fed's independence cuts both ways. They don't negotiate on fiscal policy, and the government doesn't negotiate on monetary policy (except they absolutely try to, obviously).
I’ll consider your question, but I’m unlikely to complete the necessary research in time to respond before the thirty-day comment window closes. I do generally recommend this article as a useful survey slash starting point for understanding the nature of the relationship between Congress and the Fed if you’d like to pursue it further yourself:
Is anyone arguing that the Fed is responsible for "total price levels"?
The fed funds rate is used as the foundation for nearly all lending that occurs in the US, and setting it is a key tool for regulating credit (the only job they have per this paper).
The paper also lays out how credit/money creation and destruction impacts the overall economy, so I can see how the Fed's actions related to regulating credit impact overall prices, but it's a second order effect at best and there doesn't seem to be any reasonable alternative?
I guess the issue is that the paper keeps talking about inflation caused by "supply-side issues", as if the cause of inflation can be clearly discerned at any point in time or that whatever inflation is caused by supply-side issues isn't tightly linked to the amount of credit available and therefore would fall under the purview of the Fed?
The Fed is responsible for controlling inflation; if taxation of excess business growth (relative to household spending power) beyond the inflation target serves that purpose, then how businesses choose to spend the excess growth (to avoid tax penalties) — either by lowering the price level and/or raising total wages paid — is entirely up to each business to determine in their specific circumstance and industry.
I agree tax rates are disinflationary in theory and I believe in practice to an extent, so it could be another tool in the Fed's toolbox but not one I think they want to have or one that Congress is willing (or arguably able on their own, though they wouldn't have to if the Fed's role were just advisory) to give up.
But what does that have to do with the paper you posted?
Ah, we both agree on the reality of an unwilling Congress, for sure :) I misunderstood your request for a paper as topic unfamiliarity, apologies; feel free to disregard the link posted.
> These critiques of zirp never explain what should have been done differently.
Controversially: They don't have to. The point of this piece (and similar ones) isn't "how we should treat the next similar-to-2008 financial crisis", it's that the current desire to "RETRVN TO ZIRP" is dangerous.
Perhaps there truly was no better way to respond to the Great Recession. There's a pretty good case to be made that the recovery has been a wonderous success of modern central banking. That doesn't change the fact that ZIRP had downsides, big ones.
> If the Fed had actually made money "too cheap" inflation would have kicked in much earlier.
I'm not terribly sold on this economic theory, so do take that in mind for the rest of this comment.
One thing to consider: While there was shockingly little inflation in general goods and services, there has been pretty notable asset price inflation. P/E ratios have been steadily creeping up since 2010. The real estate market's supply-shortage has turbocharged it's inflation.
> Ultimately money is neutral in the long run.
This is true, but not particularly useful; It's a very "long" "long run". The conceit of modern central banking is to "smooth out" that long term trend, and we have many examples where (even non-modern) monetary policy can screw up a country.
The big problem with Trump's desire to hit the gas on the economy and slam interest rates into the floor is that this just very clearly does not work. At worst he'll quickly find himself in the situation Erdogan got himself, at best (that is, "best Trump seizes the fed" scenario) the US will find itself in an asset bubble economy like Japan.
And unlike Japan and Turkey, the US has a lot more to lose. Pension funds make up a sizable portion of the wealth and spending in the US. If the stock market were to take a hit similar to the Dotcom bubble crash or "Lost Decade(s)", pensions will need to be adjusted downwards, to disastrous and self-reinforcing economic consequences. (Another fun layer to this is that those pensions tend to be supplemented by real estate assets, which are not in a "true" bubble but will most certainly collapse in a steep recession.)
Then you add in the fact pensions are invested into Private Equity, and it’s glaringly obvious how fragile (and already broken) the US economy is.
Returning to ZIRP is bad, as is removing the Fed’s independence, as is allowing PE to continue operating unchecked, as is a whole bunch of other stuff (over regulation of small businesses, under regulation of corporate behemoths, over reliance on government assistance programs by workers of for-profit companies due to low wages, the precarity of gig work, the displacement of educated workers by automation while simultaneously dismantling social safety nets, the student debt crisis, the housing crisis, the auto crisis, infrastructure crisis, etc, etc).
As you pointed out (and the initial detractor ignores), it’s not that ZIRP itself was bad in theory, but rather that a return to it - knowing the harms it caused - is bad, and that there is no outcome of the Fed losing independence that doesn’t end with the wholesale demolition of the foundation of the global economy, that being the US Dollar and Economic engine lifting all boats through political independence.
There was inflation in asset prices during that period. Prices for health and education also went up far above 2% annually. The problem is that CPI is a deliberately incomplete measure.
I for the life of me cannot understand why everyone just rolls over. There is no fight. Media, CEOs, Lawmakers, there’s no protest and no pushback. It’s insanity.
Because those holding the levers of power saw the BLM protests and rising unionization efforts during COVID, and demanded mandatory RTO and AI investment to preserve their gains.
I think most self-aware people know which way the pendulum is swinging, and the reason there’s “no fight” right now is because those of us who know what’s coming next are too busy protecting ourselves to organize protests again. We did Occupy Wall Street, we did XR, we did BLM and Gaza and anti-ICE, but those with their hands on the levers of power have made it abundantly clear that nothing will change until they’re dead, regardless of how many other people suffer and die before them.
And so, we’re making sure they die first by prioritizing our present survival and taking targeted opportunities when they present themselves, rather than trying to organize a mass movement that most of our peers refuse to give a shit about because they can still make rent as a burrito taxi with three roommates, for now.
From my perspective, they hate it. Police protect capital, and any movement that threatens police in turn threatens capital.
CRT is just history, and the current holders of power are terrified at being held accountable for historical errors and choices, hence the opposition to it.
Wall Street hates anything that breaks up or diversifies those at the top, and it’s why they were all too happy to embrace these on the surface when hiring was tight, and then throw them aside as soon as it was more profitable to do so.
Trying to ascribe morality to capital is like anthropomorphizing your lounge chair, and also why I’m in the “no corps at Pride” camp: objects don’t have ethics.
You're right about stability, but we aren't experiencing stability in the long, medium, or short term so compliance or even support of Trump's policies make no sense.
I assume megacorp executives think they'll be able to achieve regulatory capture to the point where they'll remain on top forever, but I don't agree with that conclusion.
The industrial leaders in Germany in the 1920s and 1930s also thought they could control Hitler, who was also rightly seen as incompetent. That did not work out well for them.
Because of regulatory capture. The interests of the largest companies align with a government that over regulates and over taxes. It punishes their less sophisticated, smaller competition that can’t cope with the regulation and supply chain disruption. Meanwhile billionaires can call up Trump, flatter him, and ask for exceptions to policies.
It’s good for them in the near term and absolutely sucks for the competiveness of the US economy longer term
This boths sides stuff is such bullshit, we have armed goons disappearing people on the streets, there's only one side doing this. There were no armed goons disappearing people in the streets last year, it is very clear that both sides are not the same.
>This boths sides stuff is such bullshit, we have armed goons disappearing people on the streets,
When people used to say "disappearing people off the streets", they were trying to paint a picture out of Orwell's 1984, where the secret police not only drag someone off never to be seen again, but no one can or will acknowledge that they were ever born in the first place.
When people today say "disappearing people off the streets", they mean illegal aliens are being detained to be deported to their home countries, but not actually deported because it takes forever for the court cases to slowly roll onward. But these same people also confused and hysterical why only rabid Democrats are alarmed by this.
> they mean illegal aliens are being detained to be deported to their home countries
Are you sure about this? Didn't the Supreme Court recently decide these people can be sent to a third-party nation? [1]
> When people used to say "disappearing people off the streets"
Disappearing happens in real life, not just in "1984". It doesn't mean everyone pretends the person never existed, just that their current status and location is completely unknown. This kind of "not knowing" seems really common with the current administration, with lawyers mentioning being unable to find or talk to their clients. [2]
> but that the detention centers get honest-to-god marketing names ("Alligator Alcatraz")
Just because you know of a detention location ("Alligator Alcatraz") does not mean you know who is there and for what reasons. Without that transparency, bad shit can get ignored or swept under the rug.
Go to Los Angeles, and see all the missing posters hanging around everywhere. It's haunting. Many of them are legal residents and not criminals. I know of a neighbor that has been missing for over a month with no word, and was a green card holder. It seems like your sources are pretty biased and unaware of what is actually going on. You can be faulted for that, I guess, despite the ample video evidence to the contrary, but not really for the arrogance of this comment.
What does this even mean? I’ve one single anecdote in the post you’re responding to, and the rest you’ve ignored. There’s plenty of media coverage on this same topic if you care to verify. Facts aren’t biased, but that’s not really what we’re talking about here, is it?
> When people used to say "disappearing people off the streets", they were trying to paint a picture out of Orwell's 1984, where the secret police not only drag someone off never to be seen again, but no one can or will acknowledge that they were ever born in the first place.
I don't know which people you are talking about who did that, but people I’ve seen doing it were more likely to be implicitly (or, fairly often, explicitly) referencing historical real-world authoritarianism like Pinochet’s Chile, not dystopian fiction like 1984, when they talked about governments disappearing people off the streets.
Though common to all three (authoritarian history, dystopian fiction, and the present American regime) is concealment of the fact of detention, the location of the detained, and sometimes the fact of the detained’s death
>but people I’ve seen doing it were more likely to be implicitly (or, fairly often, explicitly) referencing historical real-world
Covered by my short phrase "out of".
>Though common to all three (authoritarian history, dystopian fiction, and the present American regime) is concealment of the fact of detention,
Yes, which is why only you and I can talk about it. No one else here even knows about the detentions, since they're so concealed. Have you not noticed that not only are they not concealed, but that the detention centers get honest-to-god marketing names ("Alligator Alcatraz")?
Maybe both are guilty. One is guilty and trying to remove the other from office because of the other's guilt, though.
That is, maybe both are guilty. Maybe both should be removed from office. But Trump's guilt (actual convictions, in fact) leave him no room for saying that someone should be removed from office on the basis of mere accusations.
There isn't one. The entire article (as with nearly every one on that site) is a very long shitpost.
That said, I do actually agree with the risks outlined in the article (if the Fed is no longer seen as independent, the global investment/financial system is likely to lose faith in the stability of the US dollar, which is likely to be a very bad thing) and I suspect the author and I share the same general opinion of Trump.
However, the writing is almost unreadable because the author is trying too hard to be REALLY PISSED OFF at the right and edgy IMO, resulting in weird tangents like the one you pointed out.
The interesting part, to me, was the disconnect between how the bond market and stock market are reacting. Can anyone predict how this is going to shake out?
I find it interesting the US has gone so long without trying centralized, state run economic policy. If you think about it, it aligns with a lot of populist movements around the world.
I think we had the boogieman of the Soviet Union to create an elite consensus on how to manage the market, and now that seems old hat. So we will now experiment and likely suffer the consequences.
It sucks Trump is singularly focused on the stock market. The market doesn’t really reflect the downside of a lack of Fed independence. Nor much of the downside of tariffs. Much of this economic policy stabilizes large companies, anligning them with the Govt, penalizing small/medium businesses. So of course the stock market will go up while the rest of the economy suffers. Billionaires have chosen to reign in hell rather than be fairly well off in heaven.
The founding premise of the US is avoiding consolidation of power. There are many downsides to that (largely concerning waste due to duplication of efforts and other inefficiencies), but that's why it's never taken hold in the US.
Hopefully we get a mild reminder of the severe downsides of centralized power and that's enough to get the country back on track.
He's going to mortally wound the US economy, which was already precarious.
The US is not competitive with China, absent the USD. The Federal Reserve is a foundational reason why the USD is the most important global currency for trade.
There are nontrivial odds of Venezuela style outcomes for the US. The US media - particularly partisan mainstream conservative sources like FOX and CNBC - is drastically understating the damage this administration is to the US position in the global economic system.
> The US is not competitive with China, absent the USD.
I'm sorry, but this is absurd. The US produces an enormous amount of goods and services, many of which are hard to replicate, and has a huge amount of natural resources available to it.
I would like it if the NYT was willing to be this plain about the news. They have real journalists who do real work searching for the truth and lose our trust with the delivery. Its infuriating to watch Trump use the Cohn, Moses, and fascist playbook and watch the media pretend like his words are anything but a tool toward those ends.
Fact of the matter is that organisations like the US Fed have too much unaccountable power, Trump or no Trump. It was only a matter of time before something like this was bound to happen, notice how no-one is out there in the streets protesting for the Fed's independence because not a single normal (voting) person cares about it.
My take on fed's unaccountable power is you can't and shouldn't do anything about it and keep it that way. Because if the fed does do a good job, the economy keeps floating just fine. On the contrary, if it doesn't, its just chaos and catastrophe, that benefits no one, including the fed. So in essence, the job is to prevent disaster. Personally, I think it is a super shitty job.
Normal (voting) person is oblivious to both what the fed does and what will happen if the fed doesn't do it. All that a normal (voting) people care about, are numbers on price tags, and the fact that those numbers aren't as low as they used to be.
Fed’s independence, IMO is only independent to political officials’ commands, but it still very much listen to some other elites e.g. the banking aristocrats.
If those elites don’t give a fuck about the world, then Populism arises and tries to take them over.
> not really talking about a family here. I’ll switch to “elites” then
An interesting aspect of American central banking is that it doesn’t tend to cross-pollinate with commercial or investment banking. Bernanke went to MIT before a career in academia and government [1]. Yelled worked in government her whole career [2]. Powell, uniquely, worked in the private sector as an attorney and investment banker, but hasn’t been in that world for 15 years [3].
Until 2025, the Fed was legitimately independent of commercial banks’ concerns. Until Trump, Wall Street couldn’t pick its regulators the way it can now.
Flag it all you want, the writer is correct in their assertions.
ZIRP was an acceptable solution to the problem faced at the time. Its detractors rightly pointed out all the harms that would come from it, especially if it was left in place longer than necessary - and they’re all essentially vindicated in hindsight. Still, it got us out of the immediate hole by kicking the various problems down the road a bit in the hope that regulators and Congress would fix the issues permanently in the long run.
Obviously that didn’t happen, because when you give rich people and their asset managers free debt and government bailouts with no strings attached, they understandably don’t share the wealth (they wouldn’t be rich if they shared, after all). So the best we can do now is simply refuse to return to an era that exacerbated rampant speculation and irresponsible investing into burrito taxis, because we know the harms it will cause.
I also appreciate the callout of the opposing sides that are the present stock and bond markets. Stock market boosters see no end to the good that comes from ZIRP because they don’t ever have to worry about the ten-year outcome when they hold a position for less than a decade; bond holders, on the other hand, absolutely have to worry about these outcomes, and we’re seeing their anxiety in sectors with outsized exposure to bond yields - like the insurance industry dropping customers and raising premiums to offset record property valuations in areas overly exposed to climate change and disaster risks.
Viewed through that lens, and it’s the equivalent of a Doctor warning the patient that if they don’t start exercising and eating healthier today, they’ll be dead in a decade - and the patient figuring that’s tomorrow’s problem, then fucking off to McDonald’s for a large combo meal and a sundae.
It seems to me the assertions are mostly junk. Just from the title:
>The Stock Market Is Selling Its Soul and the Fed’s Independence to Trump Because ZIRP Broke The World
"The stock market doesn't have a soul" - it's a market where you can buy and sell equities which have done for some decades
"Fed’s Independence to Trump Because ZIRP Broke The World" - I don't think so. Trump is bullying the Fed because he wants to print money to compensate for his dumb tariffs.
"ZIRP Broke The World." Well, it caused problems but it would make almost as much sense to say I put on three pounds last week because ZIRP Broke The World. Cause and effect don't really line up.
I'm sorry, but is one of your honest arguments: well actually "the stock market doesn't have a soul"?
Fun fact, neither your parent nor the person who wrote article thinks the stock market has an actual soul.
(fwiw: this comment should not be construed as me agreeing with the article. I really don't have enough knowledge to even kind of consider it's veracity)
I get annoyed be "the dollar is eyeing going up due to waves of liquidity, but feels stable in it's soul" type word salad.
Presumably it was flagged due to the inflammatory nature of the article and the inevitable political posts (like this one I'm now responding to!) that would result.
For the record, the Fed did raise interest rates before COVID-era financial policy kicked inflation into high gear (this is the origins of Trump's ire for the Fed, because he generally wants to keep rates as low as possible while he's in office to juice economic growth), but backed off somewhat because the economy was not doing well and inflation was not the primary concern.
Your doctor analogy does not seem to show much understanding of how the stock and bond markets work or the insurance sector works.
Presumably also a little bit because sites like this are owned by VC capital that stand to gain or lose a lot on ZIRP policies, and have an unflagging belief in their infallibility - as well as many users here's income depending on startups backed almost entirely by VC funds. I also fail to see how the post you are responding to is political.
It's difficult to convince a person of something when they are paid not to understand it.
You get it; the person you replied to does not.
Also amused that ZIRP is permitted to be discussed freely in the context of VC funding rounds and its benefits on startup growth, but any sort of detraction or critique of its monetary policies is immediately flagged. If I had a tinfoil hat, I’d be inclined to make some claims as to why that might be, here.
I am also amused at the glut of anons happy to say I’m wrong in how something works, yet conveniently neglect to explain how I’m wrong or provide the “correct” perspective to have. At this point in my eTenure, I just assume that anyone saying I’m wrong but refusing to articulate the how/what/when/where/why of it are, themselves, actually wrong, otherwise they’d posit a counterargument instead of a drive-by “you’re wrong lol” and a downvote.
> If I had a tinfoil hat...
If? You can believe what you want, but dang and the other mods have said repeatedly that their owners are completely hands off. If you want to argue that the mods know where their bread is buttered and act accordingly, have at it, but don't pretend you aren't creating a (meaningless in the grand scheme of things) conspiracy theory.
> I am also amused at the glut of anons happy to say I’m wrong in how something works, yet conveniently neglect to explain how I’m wrong or provide the “correct” perspective to have. At this point in my eTenure, I just assume that anyone saying I’m wrong but refusing to articulate the how/what/when/where/why of it are, themselves, actually wrong.
It's a waste of time to argue with someone who is convinced they are right about something with zero evidence supporting their position. So again, believe what you want, but be aware of what you're doing.
Website moderation and discourse usually if not always reflects the values and beliefs of the people that own it. They don’t even have to be directly involved for this to be the case - but it’d be really silly to say this site doesn’t take a particular slant in favor of the people that own it. Whatever the cause that may be is of course a matter of debate, but pretending it doesn’t exist is silly.
These critiques of zirp never explain what should have been done differently.
It's very unlikely the Fed kept rates too low because inflation didn't exceed 2% for 12 years from 2008 to 2021. If the Fed had actually made money "too cheap" inflation would have kicked in much earlier.
More likely, we made it very hard to do new stuff in the country, which made the value of borrowed money low.
Congress spent decades adding regulations (often for good reason) that ultimately resulted in it being too expensive to do most things inside the US. If a business is banned from investing in most new things, it won't need to borrow more money.
The Fed just responded to the market's appraisal of money value. You can even see this in the long term charts - interest rates declined almost continuously from 1984 to 2022.
The entire time, inflation stayed at or below 2%. If the Fed had kept rates higher, theory would predict they would have caused a recession (and Scott Sumner has spent more than a decade arguing this is actually what caused the long deep recession of 2008 - money was too expensive, even at 0%).
Ultimately money is neutral in the long run. The things that truly matter for growth are laws, culture, natural resources and education. These are the causes of our present social dysfunction. These are the issues we should focus on fixing. Not fiddling with interest rates.
The Fed could have instructed Congress to tax any growth in retained or dividended profits in excess of the annual Fed inflation target. ‘Pay more wages or charge less money’ is a direct lever over inflation, even after a partial reduction in overgrowth penalty tax is granted for research spending, and isn’t prone to causing deflation. Sadly, they don’t consider this lever in-scope for economic policy, and as far as I know they didn’t even try (and so Congress had no opportunity to consider, refuse, or ignore their request).
Do you have an example of other times the Federal Reserve has lobbied Congress to adopt a policy?
The closest I could find by searching "federal reserve asks congress" was Fed Chair Jerome Powell asking Congress to clarify the legality of marijuana[1].
I think the Fed's independence cuts both ways. They don't negotiate on fiscal policy, and the government doesn't negotiate on monetary policy (except they absolutely try to, obviously).
1: https://apnews.com/article/business-jerome-powell-congress-d...
I’ll consider your question, but I’m unlikely to complete the necessary research in time to respond before the thirty-day comment window closes. I do generally recommend this article as a useful survey slash starting point for understanding the nature of the relationship between Congress and the Fed if you’d like to pursue it further yourself:
https://harvardlawreview.org/print/vol-138/the-federal-reser...
Is anyone arguing that the Fed is responsible for "total price levels"?
The fed funds rate is used as the foundation for nearly all lending that occurs in the US, and setting it is a key tool for regulating credit (the only job they have per this paper).
The paper also lays out how credit/money creation and destruction impacts the overall economy, so I can see how the Fed's actions related to regulating credit impact overall prices, but it's a second order effect at best and there doesn't seem to be any reasonable alternative?
I guess the issue is that the paper keeps talking about inflation caused by "supply-side issues", as if the cause of inflation can be clearly discerned at any point in time or that whatever inflation is caused by supply-side issues isn't tightly linked to the amount of credit available and therefore would fall under the purview of the Fed?
The Fed is responsible for controlling inflation; if taxation of excess business growth (relative to household spending power) beyond the inflation target serves that purpose, then how businesses choose to spend the excess growth (to avoid tax penalties) — either by lowering the price level and/or raising total wages paid — is entirely up to each business to determine in their specific circumstance and industry.
I don't understand your point.
I agree tax rates are disinflationary in theory and I believe in practice to an extent, so it could be another tool in the Fed's toolbox but not one I think they want to have or one that Congress is willing (or arguably able on their own, though they wouldn't have to if the Fed's role were just advisory) to give up.
But what does that have to do with the paper you posted?
Ah, we both agree on the reality of an unwilling Congress, for sure :) I misunderstood your request for a paper as topic unfamiliarity, apologies; feel free to disregard the link posted.
In fact, the Fed did try a time or two to get off the 0% rate in the decade after 2008. The economy reacted badly, so they backed off.
> These critiques of zirp never explain what should have been done differently.
Controversially: They don't have to. The point of this piece (and similar ones) isn't "how we should treat the next similar-to-2008 financial crisis", it's that the current desire to "RETRVN TO ZIRP" is dangerous.
Perhaps there truly was no better way to respond to the Great Recession. There's a pretty good case to be made that the recovery has been a wonderous success of modern central banking. That doesn't change the fact that ZIRP had downsides, big ones.
> If the Fed had actually made money "too cheap" inflation would have kicked in much earlier.
I'm not terribly sold on this economic theory, so do take that in mind for the rest of this comment.
One thing to consider: While there was shockingly little inflation in general goods and services, there has been pretty notable asset price inflation. P/E ratios have been steadily creeping up since 2010. The real estate market's supply-shortage has turbocharged it's inflation.
> Ultimately money is neutral in the long run.
This is true, but not particularly useful; It's a very "long" "long run". The conceit of modern central banking is to "smooth out" that long term trend, and we have many examples where (even non-modern) monetary policy can screw up a country.
The big problem with Trump's desire to hit the gas on the economy and slam interest rates into the floor is that this just very clearly does not work. At worst he'll quickly find himself in the situation Erdogan got himself, at best (that is, "best Trump seizes the fed" scenario) the US will find itself in an asset bubble economy like Japan.
And unlike Japan and Turkey, the US has a lot more to lose. Pension funds make up a sizable portion of the wealth and spending in the US. If the stock market were to take a hit similar to the Dotcom bubble crash or "Lost Decade(s)", pensions will need to be adjusted downwards, to disastrous and self-reinforcing economic consequences. (Another fun layer to this is that those pensions tend to be supplemented by real estate assets, which are not in a "true" bubble but will most certainly collapse in a steep recession.)
Then you add in the fact pensions are invested into Private Equity, and it’s glaringly obvious how fragile (and already broken) the US economy is.
Returning to ZIRP is bad, as is removing the Fed’s independence, as is allowing PE to continue operating unchecked, as is a whole bunch of other stuff (over regulation of small businesses, under regulation of corporate behemoths, over reliance on government assistance programs by workers of for-profit companies due to low wages, the precarity of gig work, the displacement of educated workers by automation while simultaneously dismantling social safety nets, the student debt crisis, the housing crisis, the auto crisis, infrastructure crisis, etc, etc).
As you pointed out (and the initial detractor ignores), it’s not that ZIRP itself was bad in theory, but rather that a return to it - knowing the harms it caused - is bad, and that there is no outcome of the Fed losing independence that doesn’t end with the wholesale demolition of the foundation of the global economy, that being the US Dollar and Economic engine lifting all boats through political independence.
There was inflation in asset prices during that period. Prices for health and education also went up far above 2% annually. The problem is that CPI is a deliberately incomplete measure.
I for the life of me cannot understand why everyone just rolls over. There is no fight. Media, CEOs, Lawmakers, there’s no protest and no pushback. It’s insanity.
Because those holding the levers of power saw the BLM protests and rising unionization efforts during COVID, and demanded mandatory RTO and AI investment to preserve their gains.
I think most self-aware people know which way the pendulum is swinging, and the reason there’s “no fight” right now is because those of us who know what’s coming next are too busy protecting ourselves to organize protests again. We did Occupy Wall Street, we did XR, we did BLM and Gaza and anti-ICE, but those with their hands on the levers of power have made it abundantly clear that nothing will change until they’re dead, regardless of how many other people suffer and die before them.
And so, we’re making sure they die first by prioritizing our present survival and taking targeted opportunities when they present themselves, rather than trying to organize a mass movement that most of our peers refuse to give a shit about because they can still make rent as a burrito taxi with three roommates, for now.
Wall Street loves BLM and critical race theory, they dredged up every divisive 1960s idea they could after OWS.
From my perspective, they hate it. Police protect capital, and any movement that threatens police in turn threatens capital.
CRT is just history, and the current holders of power are terrified at being held accountable for historical errors and choices, hence the opposition to it.
Wall Street hates anything that breaks up or diversifies those at the top, and it’s why they were all too happy to embrace these on the surface when hiring was tight, and then throw them aside as soon as it was more profitable to do so.
Trying to ascribe morality to capital is like anthropomorphizing your lounge chair, and also why I’m in the “no corps at Pride” camp: objects don’t have ethics.
Too much to lose if you’ve accumulated a fair amount of wealth or power from the status quo. Who would expose their neck on moral grounds?
They're on the same team.
Stability is more profitable than chaos.
This is chaos.
You're right about stability, but we aren't experiencing stability in the long, medium, or short term so compliance or even support of Trump's policies make no sense.
I assume megacorp executives think they'll be able to achieve regulatory capture to the point where they'll remain on top forever, but I don't agree with that conclusion.
The industrial leaders in Germany in the 1920s and 1930s also thought they could control Hitler, who was also rightly seen as incompetent. That did not work out well for them.
Hubris is a heluva drug.
Because of regulatory capture. The interests of the largest companies align with a government that over regulates and over taxes. It punishes their less sophisticated, smaller competition that can’t cope with the regulation and supply chain disruption. Meanwhile billionaires can call up Trump, flatter him, and ask for exceptions to policies.
It’s good for them in the near term and absolutely sucks for the competiveness of the US economy longer term
Fed independence has not been good for the working class to begin with. Good to see it going away.
The real "genie is not going back in the bottle" moment is that both sides have decided that power - at any cost - is a valid strategy.
And that's very apparent even in this article which leads with the logical fallacy of moral equivalence
". . . and America’s preeminent real estate fraudster who bankrupted six rigged businesses is all of a sudden concerned with supposed mortgage fraud"
BOTH are guilty, BOTH are crooked!
This directly leads to a lot of "the whole system is broken, may as well get mine"
This boths sides stuff is such bullshit, we have armed goons disappearing people on the streets, there's only one side doing this. There were no armed goons disappearing people in the streets last year, it is very clear that both sides are not the same.
>This boths sides stuff is such bullshit, we have armed goons disappearing people on the streets,
When people used to say "disappearing people off the streets", they were trying to paint a picture out of Orwell's 1984, where the secret police not only drag someone off never to be seen again, but no one can or will acknowledge that they were ever born in the first place.
When people today say "disappearing people off the streets", they mean illegal aliens are being detained to be deported to their home countries, but not actually deported because it takes forever for the court cases to slowly roll onward. But these same people also confused and hysterical why only rabid Democrats are alarmed by this.
> they mean illegal aliens are being detained to be deported to their home countries
Are you sure about this? Didn't the Supreme Court recently decide these people can be sent to a third-party nation? [1]
> When people used to say "disappearing people off the streets"
Disappearing happens in real life, not just in "1984". It doesn't mean everyone pretends the person never existed, just that their current status and location is completely unknown. This kind of "not knowing" seems really common with the current administration, with lawyers mentioning being unable to find or talk to their clients. [2]
> but that the detention centers get honest-to-god marketing names ("Alligator Alcatraz")
Just because you know of a detention location ("Alligator Alcatraz") does not mean you know who is there and for what reasons. Without that transparency, bad shit can get ignored or swept under the rug.
[1] https://www.npr.org/2025/06/23/g-s1-71529/supreme-court-sout...
[2] https://www.msnbc.com/ana-cabrera-reports/watch/judge-orders...
Go to Los Angeles, and see all the missing posters hanging around everywhere. It's haunting. Many of them are legal residents and not criminals. I know of a neighbor that has been missing for over a month with no word, and was a green card holder. It seems like your sources are pretty biased and unaware of what is actually going on. You can be faulted for that, I guess, despite the ample video evidence to the contrary, but not really for the arrogance of this comment.
>It seems like your sources are pretty biased
But your anecdotes aren't biased.
What does this even mean? I’ve one single anecdote in the post you’re responding to, and the rest you’ve ignored. There’s plenty of media coverage on this same topic if you care to verify. Facts aren’t biased, but that’s not really what we’re talking about here, is it?
> When people used to say "disappearing people off the streets", they were trying to paint a picture out of Orwell's 1984, where the secret police not only drag someone off never to be seen again, but no one can or will acknowledge that they were ever born in the first place.
I don't know which people you are talking about who did that, but people I’ve seen doing it were more likely to be implicitly (or, fairly often, explicitly) referencing historical real-world authoritarianism like Pinochet’s Chile, not dystopian fiction like 1984, when they talked about governments disappearing people off the streets.
Though common to all three (authoritarian history, dystopian fiction, and the present American regime) is concealment of the fact of detention, the location of the detained, and sometimes the fact of the detained’s death
>but people I’ve seen doing it were more likely to be implicitly (or, fairly often, explicitly) referencing historical real-world
Covered by my short phrase "out of".
>Though common to all three (authoritarian history, dystopian fiction, and the present American regime) is concealment of the fact of detention,
Yes, which is why only you and I can talk about it. No one else here even knows about the detentions, since they're so concealed. Have you not noticed that not only are they not concealed, but that the detention centers get honest-to-god marketing names ("Alligator Alcatraz")?
Maybe both are guilty. One is guilty and trying to remove the other from office because of the other's guilt, though.
That is, maybe both are guilty. Maybe both should be removed from office. But Trump's guilt (actual convictions, in fact) leave him no room for saying that someone should be removed from office on the basis of mere accusations.
Ironically, he was complaining about low interest rates before he was in office: https://x.com/realDonaldTrump/status/119492658963025920.
But ideological consistency is, I guess, not his concern.
He is perfectly ideologically consistent to: He is never wrong, and is never his fault.
> President Donald Trump could only be birthed from a distorted world where borrowing is free and future cash flows are infinite.
I don't really understand this causal link. Can someone enlighten me?
There isn't one. The entire article (as with nearly every one on that site) is a very long shitpost.
That said, I do actually agree with the risks outlined in the article (if the Fed is no longer seen as independent, the global investment/financial system is likely to lose faith in the stability of the US dollar, which is likely to be a very bad thing) and I suspect the author and I share the same general opinion of Trump.
However, the writing is almost unreadable because the author is trying too hard to be REALLY PISSED OFF at the right and edgy IMO, resulting in weird tangents like the one you pointed out.
[dead]
The snark obscured the actual points.
The interesting part, to me, was the disconnect between how the bond market and stock market are reacting. Can anyone predict how this is going to shake out?
I find it interesting the US has gone so long without trying centralized, state run economic policy. If you think about it, it aligns with a lot of populist movements around the world.
I think we had the boogieman of the Soviet Union to create an elite consensus on how to manage the market, and now that seems old hat. So we will now experiment and likely suffer the consequences.
It sucks Trump is singularly focused on the stock market. The market doesn’t really reflect the downside of a lack of Fed independence. Nor much of the downside of tariffs. Much of this economic policy stabilizes large companies, anligning them with the Govt, penalizing small/medium businesses. So of course the stock market will go up while the rest of the economy suffers. Billionaires have chosen to reign in hell rather than be fairly well off in heaven.
The founding premise of the US is avoiding consolidation of power. There are many downsides to that (largely concerning waste due to duplication of efforts and other inefficiencies), but that's why it's never taken hold in the US.
Hopefully we get a mild reminder of the severe downsides of centralized power and that's enough to get the country back on track.
He's going to mortally wound the US economy, which was already precarious.
The US is not competitive with China, absent the USD. The Federal Reserve is a foundational reason why the USD is the most important global currency for trade.
There are nontrivial odds of Venezuela style outcomes for the US. The US media - particularly partisan mainstream conservative sources like FOX and CNBC - is drastically understating the damage this administration is to the US position in the global economic system.
supporting evidence: https://www.yahoo.com/news/articles/south-korea-tells-china-...
> The US is not competitive with China, absent the USD.
I'm sorry, but this is absurd. The US produces an enormous amount of goods and services, many of which are hard to replicate, and has a huge amount of natural resources available to it.
I would like it if the NYT was willing to be this plain about the news. They have real journalists who do real work searching for the truth and lose our trust with the delivery. Its infuriating to watch Trump use the Cohn, Moses, and fascist playbook and watch the media pretend like his words are anything but a tool toward those ends.
https://www.orwellfoundation.com/the-orwell-foundation/orwel...
Fact of the matter is that organisations like the US Fed have too much unaccountable power, Trump or no Trump. It was only a matter of time before something like this was bound to happen, notice how no-one is out there in the streets protesting for the Fed's independence because not a single normal (voting) person cares about it.
My take on fed's unaccountable power is you can't and shouldn't do anything about it and keep it that way. Because if the fed does do a good job, the economy keeps floating just fine. On the contrary, if it doesn't, its just chaos and catastrophe, that benefits no one, including the fed. So in essence, the job is to prevent disaster. Personally, I think it is a super shitty job.
Normal (voting) person is oblivious to both what the fed does and what will happen if the fed doesn't do it. All that a normal (voting) people care about, are numbers on price tags, and the fact that those numbers aren't as low as they used to be.
How are those two claims coherent? They aren't obviously related
Because to the average person, Fed independence means affordable middle/lower class life. That is what people are protesting.
Fed’s independence, IMO is only independent to political officials’ commands, but it still very much listen to some other elites e.g. the banking aristocrats.
If those elites don’t give a fuck about the world, then Populism arises and tries to take them over.
Exactly what’s happening right now.
> the banking aristocrats
This...is not a thing. Banking hasn't been dominated by a hereditary class since the Great Depression.
Just loosely speaking. I’m not really talking about a family here. I’ll switch to “elites” then.
> not really talking about a family here. I’ll switch to “elites” then
An interesting aspect of American central banking is that it doesn’t tend to cross-pollinate with commercial or investment banking. Bernanke went to MIT before a career in academia and government [1]. Yelled worked in government her whole career [2]. Powell, uniquely, worked in the private sector as an attorney and investment banker, but hasn’t been in that world for 15 years [3].
Until 2025, the Fed was legitimately independent of commercial banks’ concerns. Until Trump, Wall Street couldn’t pick its regulators the way it can now.
[1] https://en.m.wikipedia.org/wiki/Ben_Bernanke
[2] https://en.m.wikipedia.org/wiki/Janet_Yellen
[3] https://en.m.wikipedia.org/wiki/Jerome_Powell