Economic theory as it is now constructed is a wrecking ball. From an article titled, Time to Reform the Fed ─ Because It Doesn’t ‘Have a Clue’. It starts here with an assessment of the dire straits of the US economy, where any such thing is typically denied, but for a change someone feels the need to point it out.

Since the Great Recession ended in 2009, the recovery has been slow and painful. Wages have been so stagnant that the average American family earns $1,000 a year less in income than it did in 2008. That’s why some two-thirds of people believe that their children won’t be better off than they were — a reversal of the American Dream.

How could they be better off since the wealth creation process has been diverted into government waste-creating schemes of one sort or another. Fiscal policy in its modern Keynesian disguise, insists it doesn’t matter what you spend on, but if you believe that, you ought to have your licence to practise economics taken away. All that may be found in my Free Market Economics, the most relentlessly anti-Keynesian text available anywhere. There are a handful of others, but this is where you will see it all laid out based on the classical economic reasoning that was completely displaced by Keynesian theory in 1936.

What you will also find (Chapters 16 and 17) is a classical discussion on why low interest rates will wreck your economy about as comprehensively as unproductive spending. This is also nothing different from the classical theory that existed before Keynesian theory took over. Where’s all that investment that low interest rates were going to bring? You would have to read the book to find out. Meanwhile, the article continues:

A growing number of people believe the Federal Reserve has hurt rather than helped the recovery. It has pursued zero-interest-rate policies that have perversely made it impossible for many businesses to get credit to expand. The Fed and other central banks have injected trillions of dollars into the global economy; according to the New York Sun, the result is that “the world is now afflicted by a public-sector debt bubble that could rupture in any of a number of countries.”

Even more to the point, which is exactly as described in my text, we find this:

In the Bank for International Settlements’ most recent annual report, Claudio Borio analyzed the negative impact of low interest rates, concluding: “Rather than just reflecting the current weakness, low interest rates may in part have contributed to it by fueling costly financial booms and busts and delaying adjustment. The result is too much debt, too little growth, and too low interest rates. In short, low rates beget lower rates.”

Even this is too benign relative to the harm that low interest rates have done and are continuing to do. There are so many ways we are wrecking our economies, but the fallout when the Fed finally decides it cannot maintain zero interest rates forever will show once again how interesting the times we live in actually are.