Interesting priorities… so what part do you find more “oppressive”, that the Fed regulates the rates, or that we’d all be paying more for everything if they didn’t?

Your question is framed on an erroneous assumption: that the economy is not an interrelated house of cards, and the Fed and the congresscritters can manipulate certain variables to their liking and/or political advantage without dread repercussions.

Since your question, which is rather “micro”, cannot be answered without a nod to the “macro”, let’s turn the question around: Where would we be as a *world economy* if the Great Depression, Housing Meltdown of 2008, and WW2 had never occurred?

More prosperous, I think. Certainly a lot more people would be alive today who are not.

Or, put another way, what major economic recession and/or depression and (even) major War of the last 100 years was NOT caused by politicians and economists appointed by them hadn’t been sticking their noses into the laws of supply and demand and trying to improve on them?

Great Depression: The standard explanation the politicians want you to believe is that the GD was caused by the crash of a speculative bubble in the stock market driven by irrational exuberance. So, IOW, the capitalists did it to themselves.

But, then, Milton Friedman, who actually followed the facts. He (with Anna Schwartz, in this book:

…. explained how the events of 1929 did *not* inevitably cause the Great Depression. What 1929 was a severe but not unexpected or without precedent adjustment of asset prices which was indeed caused by the bursting of a speculative bubble. Left alone, recovery was inevitable, as all actors in the market aligned their activities (as they always do after a recession) to create job and economic growth.

What Friedman and Schwartz pointed out was that the 1929 recession was turned into the Great Depression by hamhanded government behavior. The Fed (notice that I am NOT an anti-Fed person, I just want them to do their job and nothing else) failed to act as the lender of last resort by raising interest rates and refusing to liquefy failing banks; Hoover signed massive tariffs into law and raised the top marginal tax rate from 25% to 63% to grind economic activity to a halt, and if that wasn’t enough to scare the hell out of everyone, FDR came into office and essentially told everyone they had something to be scared about when two days after taking office, he made it legal for the banks to refuse withdrawals for a 10 day period.

So, the Great Depression was a monetary phenomenon caused by governmental overreach, stupid economic policies and stupid politicians, which is why Ben Bernanke said this about Milton Friedman in 2002:

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.

(Of course, we just found a DIFFERENT way to do it, but that’s the 2008 story).

Imagine, if you will, where the world would be today if global net personal worth had not be zeroed during the Great Depression. Entering a global golden age, as opposed to hunkering down, country after country, not trusting anyone but our own “kind”?

But while we’re on the subject….:

Hitler and WW2:

Rather than write another tome, let’s just say that the conditions that led to Hitler’s ascendancy, and WW2 and the Holocaust, were ALSO caused by hamhanded economic policies after WW1:

This book, the 2010 Pulitzer Prize winner, is actually NOT referring to the Great Depression when it comes to “breaking the world”. It’s referring to how the unyielding political demand by the US, England, and France for reparations from Germany after WW1 devastated the German economy to the point that they resorted to an ultranationalistic socialist with no pedigree who wasn’t even a German (Hitler being Austrian, of course) who then took them where he took them.

No stupid political policies, no overreaching central bankers doing things they shouldn’t have been doing, no Hitler, no WW2, no Holocaust.

The “Great Recession”. My fingers are getting tired. The government created all the weapons of economic mass destruction that Wall Street used to bring the government down, AND greedy politicians let it happen. Enough said.

So, to return to your original question, obviously it’s better — — TODAY — to have low mortgage rates and a sky high Dow. The PROBLEM is that when low mortgage rates and the sky high Dow are caused by political tinkering, we pay the piper later on. And when it comes time to pay, the price, from the lessons of economic history, is far greater than had we paid at the time we incurred the bill.

BTW, can you think of any other countries worth emulating that fit your notion of “serious capitalism”?

Laughs. Of course not. It’s much more important to the powers-that-be to keep the rubes (that’s you and me) from getting too much control. :-)

But, that said, there are countries with more modest economic policies and there are countries with less modest economic policies. The US is one of the least modest, as democratic nations go, where a majority of politicians actually believe that the laws of supply and demand are under the control of the government.

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