Economic growth results from business owners making successful plans to invest and meet customer needs over time, but the unpredictable machinations of central banks like the Federal Reserve throw a monkey wrench in that economic calculation process. The Fed’s recent press conference is a perfect example of how the arbitrary and ambiguous decisions of central bankers foster uncertainty for entrepreneurs, argues Judy Shelton, Atlas Network senior fellow and Sound Money Project co-director, in a new analysis for The Hill.
“By perpetuating uncertainty over interest rates, the Fed is paralyzing economic growth,” Shelton explains. “It is quietly killing off the animal spirits — confidence in a better future, the willingness to work for it — that form the vital wellspring of productive endeavor. For a society that believes in both the efficiency and morality of free-market capitalism, there is no more important price than the price of capital: What does it cost to borrow the financial seed corn today that will yield a greater shared harvest tomorrow? The interest rate is a measure of our trust in the basic principles of economic liberty and free enterprise that have brought America this far; that it now depends so inexorably on the private deliberations of a small committee rather than the free interplay of supply and demand for capital should give us pause.”
Atlas Network’s Sound Money Project is devoted to correcting this problem by developing prescriptions that foster honesty, accuracy, and stability in monetary policy, which would allow people to have confidence in price signals over time and make the business decisions that result in real economic growth.