Grace, there was no need for you to make a full confession of how little you understand about economics just for me.
"There could be (a market interest rate) if the Fed would stop setting the rate."
This is indeed the very essence of the Monetarist system you have defended for so many years. And no the Fed doesn't set the "market rate" by announcing it. They help create the "market rate" by creating money and removing it from the economy through injections of debt and regulatory changes.
In the long run central banks always create money, making the "market interest rate" perpetually too low, which in turn leads to an economy abnormally based upon debt rather than equity - resulting in a brittle economy unable to withstand normal shocks without incurring great damage - or additional Monetarist ministrations to prop it up.
When they central bank removes this subsidy we begin to hear yelps from yahoos that the central bank shouldn't be tightening and "interfering with the market". Such is the upside down world of Monetarism and the welfare debtors who depend on its largess.
To say that the Fed is ahead of themselves, or behind themselves, because their posted rate varies from the "market rate" they create through their actions is an oxymoron.
As Milton Friedman pointed out, the Fed did create a great amount of money leading up to the Great Depression, but we had an economic depression because they didn't create enough of it. Friedman said if only the central bank had created even more money, we could have avoided the Great Depression.
This is the essential insanity of Monetarism which you have defended for so many years. To be fair to you, you might have been less gullible in this regard if you had an education in this area. But I suspect the subsidies of cheap debt provided by the Monetarist system would still have aligned you against capitalism, just as strongly as you are now, even had you known the difference.
As Harvard economist Joseph Schumpeter said, "Policy does not allow a choice between depression and no depression, but between depression now and a worse depression later.
Inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar (WW-I) experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy.
For recovery is sound only if it does come of itself. For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another worse crisis ahead.
Monetarists like yourself believe this can all be avoided with a debt welfare program by creating additional money. Your only quibble is what the proper rate of subsidy should be.
In a capitalist economy, money is created through new debt in expansions - which is then destroyed in the following contraction, just like normal respiration. As the economy creates wealth, deflation occurs as a natural result. This creates a natural brake on the creation of debt - as the value of collateral always declines as the economy grows. Monetarism removes this essential safety regulator.
The Monetarist vision of an economy is Violet Beauregard who swells up like a giant blueberry as Monetarists desperately try to prevent the economy from exhaling.
All very sad.
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