The Frontline episode “Age of Easy Money” investigates the Federal Reserve’s policy on money supply during the period from the Great Recession to the present. The episode argues that the Fed’s policy of “easy money,” which involved keeping interest rates low and pumping trillions of dollars into the economy, has had a number of unintended consequences, including:

• Widening the gap between rich and poor
• Fueling asset bubbles
• Increasing inequality
• Making the economy more fragile

The episode also argues that the Fed’s policy of easy money has made it more difficult to control inflation.

Thoughts on the Fed’s Policy on Money Supply

I agree with the Frontline episode that the Fed’s policy of easy money has had a number of unintended consequences. In particular, I believe that easy money has contributed to the rise of inequality and the fragility of the financial system.

One of the main ways that easy money has contributed to inequality is by driving up asset prices, such as stock prices and housing prices. This has benefited wealthy people who own a lot of assets, but it has made it harder for middle-class and working-class people to buy assets.

Easy money has also made the financial system more fragile by encouraging banks and other financial institutions to take on more risk. This is because the Fed has made it clear that it will bail them out if they get into trouble. This has led to the creation of asset bubbles, which can burst and cause a financial crisis.

The Fed’s policy of easy money has also made it more difficult to control inflation. When the Fed pumps a lot of money into the economy, it can lead to inflation. This is because there is more money chasing the same amount of goods and services. Inflation is especially harmful to low-income people, who spend a larger share of their income on necessities.

How the Fed Should Change Its Policy

The Fed should change its policy on money supply by raising interest rates and reducing its balance sheet. This will help to slow down inflation and make the financial system more stable. However, it is important to do this gradually to avoid causing a recession.

The Fed should also focus on using its other tools, such as regulation, to prevent the formation of asset bubbles.

Conclusion

The Fed’s policy of easy money has had a number of unintended consequences, including widening the gap between rich and poor, fueling asset bubbles, increasing inequality, and making the economy more fragile. The Fed should change its policy by raising interest rates and reducing its balance sheet to slow down inflation and make the financial system more stable.

Additional Thoughts

In addition to the points made above, I would like to add that the Fed’s policy of easy money has also had a number of other negative consequences, including:

• Encouraging businesses to invest in financial speculation rather than productive investment
• Making it more difficult for small businesses to compete with larger businesses
• Discouraging people from saving money
• Eroding public trust in central banks

The Fed needs to carefully consider all of the consequences of its policies, both intended and unintended. The Fed should also be more transparent about its decision-making process and hold itself accountable to the public.