When left alone, interest rates usually adjust to supply and demand forces and adjust economic events. However,when the government imposes its stimulus proposals to raise credit and lift the economy, the system is disturbed and distorted.
This unbalances the economy and does the exact opposite of what has been intended.
Ludwig von Mises wrote fully about the phenomenon in the 1920s but the economist in fashion during the 1930s recession was, unfortunately, John Maynard Keynes. He became the poster child of that recovery movement.
The Keynes government pump-priming thesis that employed prolonged stimuli actually deepened, and helped induce the Great Depression. Nevertheless, it is the premise of the Obama administration’s failed current policy.
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