It’s been about half a decade since the Great Recession, and the economy still has room for improvement. Christopher Whalen, senior managing director and head of research at Kroll Bond Rating Agency, argues that the low-interest-rate environment that arguably helped cause the 2008 financial crisis remains in place today. Per The National Interest:
When the financial crisis finally broke in 2008, the Fed responded by pushing interest rates back down to levels below the 2001-2005 period, and there they have remained. Thus, when we ask whether the response to the crisis has been effective, the first thing to consider is what has changed.
Whalen explains that while the low-interest-rate environment that arguably helped cause the 2008 financial crisis still remains, the government policy has shifted dramatically and now is arguably stifling job creation.
Today, when Fed Chair Janet Yellen and her colleagues talk about using ultra-low interest rates to boost employment, they are taking a page from the monetary playbook that dates back to the mid-1970s, when revered statesmen like Hubert Humphrey and Augustus Hawkins thought that they could legislate economic outcomes by passing laws in Washington.
And this won’t change anytime soon, Whalen says, “until policy makers begin to take notice of that fact and start to change the way in which we approach economic policy.”