Re: Don't expect job data to persuade Fed on rates
Floyd Norris reports that Janet Yellen loves to study all those employment statistics in order to set Fed policy. And that is the problem. The Fed's new leader believes that monetary policy can be used to beneficial effects. But nothing could be further from the truth. By manipulating money and interest rates, the Fed confuses entrepreneurial activity, leading to what Ludwig von Mises called "malinvestments". The natural interest rate regulates savings with profitable investment. By manipulating interest rates the Fed causes malinvestment in the time structure of production by sending too many resources to stages of production that are far removed from the consumer. These malinvestments will be revealed when the Fed stops its interventions or when the value of the currency deteriorates. Once monetary intervention is set in motion nothing can prevent the inevitable recession.