Reply To: Fed's Manipulation of Interest Rates


I suppose the first step is to see if he thinks like an economist about markets in general. For example would he agree that if the supply of a good is larger on Friday than Monday, then the price on Friday is lower than it otherwise would have been if the supply had not been larger regardless of whether or not the actual price goes up or down?

If he agrees with this, then the second step is to demonstrate how the Fed’s expansionary monetary policy increases the supply of credit through credit creation by banks.

If he agrees with this, then you can lead him to the conclusion that the monetary inflation and credit expansion generated by the Fed makes interest rates lower than they would be otherwise.

If having accepted this conclusion, he still insists that the Fed is powerless to affect interest rates, he’s probably a hopeless case.