Barron’s (April 19) published my Letter to the Editor on the Federal Reserve and monetary policy:
To the Editor:
Grant asks: “Has the decadelong experiment in interest-rate suppression yielded the expected net benefit?” He concludes that the answer is “no.” We disagree. Although one cannot run a controlled experiment to observe what would have occurred if the Federal Reserve had not responded to the financial crisis as it did, lessons from the 1930s of the consequences of not implementing a similar monetary policy are well-documented.
Is Grant advocating higher interest rates? When Federal Reserve Chairman Jerome Powell indicated last October that interest rates were likely to be rising in 2019, the S&P 500 index declined by almost 20% within three months.
Only when Powell reversed his position, in January, did the financial markets recover. If interest rates had been higher over the past 10 years, the economy would have experienced lower rates of growth and higher unemployment, and the Great Recession would have lasted longer.