During a recent episode of Steve Bannon’s War Room: Pandemic, economist Dave Brat and trade policy advisor Peter Navarro made some controversial statements about the Federal Reserve and its role in causing economic problems. The discussion was triggered by the recent decision by the Fed to keep interest rates near zero and continue buying bonds to support the economy during the COVID-19 pandemic.
Brat and Navarro argued that the Fed’s policies are actually making things worse and are rooted in a flawed understanding of economics. According to them, the Fed is responsible for creating asset bubbles, causing inflation, and exacerbating income inequality.
One of the main issues raised by Brat and Navarro is the idea that low interest rates are causing the rich to get richer while the poor get poorer. They argue that low interest rates encourage wealthy investors to put their money into the stock market, driving up prices and making them even richer. Meanwhile, ordinary people who rely on savings accounts and fixed-income investments are stuck with meager returns and struggling to make ends meet.
Another point made by Brat and Navarro is that the Fed’s bond-buying program is creating dangerous levels of debt, both for the government and for individual consumers. Because the Fed is effectively printing money to buy bonds, it’s flooding the economy with excess cash that could lead to runaway inflation down the line. And as more and more people take on debt to buy houses, cars, and other big-ticket items, they’re putting themselves at risk of financial ruin if the economy takes a turn for the worse.
Critics of Brat and Navarro’s views would argue that the problems with the economy are much more complex than simply blaming the Fed. They would point to other factors such as globalization, technological change, and the decline of labor unions as key drivers of economic inequality and stagnation.
However, Brat and Navarro are not alone in their criticism of the Fed. Many economists and political figures have expressed skepticism about the central bank’s role in managing the economy, particularly in the wake of the 2008 financial crisis.
Ultimately, the debate over the Fed’s role in the economy is likely to continue. As the COVID-19 pandemic drags on and the government continues to struggle with record levels of debt and unemployment, it’s clear that something needs to change. Whether that change will involve a more aggressive role for the Fed, or a rethinking of the entire economic system, remains to be seen.