Most of us in the West know, or should know, that all things being equal it is best for the Federal Reserve not to intervene in the economy. We prefer market forces to work. But of course all things are not equal.
The Federal Reserve’s balance sheet is poised to exceed $4 trillion, prompting warnings its record easing is inflating asset-price bubbles and drawing renewed lawmaker scrutiny just as Janet Yellen prepares to take charge.
So long as a central bank decides to hold interest rates at a chosen level and is prepared to provide liquidity to any bank that requires it, the central bank stands in the market to offer unlimited quantities of money at the stated rate.
The monthly figures for the U.S. dollar components of Austrian, or True Money Supply, for February are now in. TMS plus excess reserves amount to the quantity of money that can be drawn down without notice only foregoing interest.