Are We Asking Too Much of the Federal Reserve—or Too Little?

http://prospect.org/article/are-we-asking-too-much-federal-reserve%E2%80%94or-too-little

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There has been obsessive chatter about whether the Federal Reserve will, or should, raise interest rates this fall. At the Fed’s annual end-of-summer gabfest at Jackson Hole, Wyoming, the issue was topic A.

Advocates of a rate hike make the following claims:

Very low rates were necessary when the economy was deep in recession. Now, with growth up and unemployment down, the near-zero rates are creating speculative bubbles. They are not really stimulating the economy much, as corporations put cash into stock buybacks and bankers park spare money at the Fed itself. So let’s get on with a more normal borrowing rate.

Opponents of a rate hike counter that the economy is a lot weaker than it looks. Wages are going nowhere. A lot of the jobs that have pushed down the nominal employment rate are lousy jobs. China’s economy has just hit a big wall, which will slow down global growth.

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