How Easy Money Is Rotting America from the Inside-Out

“The same thing will happen to streets, bridges, and plumbing. This is one of the ways urban decay happens: easy money policies fund unsustainable urban infrastructure projects which make politicians look good, but end up crumbling a few years or decades later. The Flint water crisis happened in large part because the Federal government funded infrastructure projects that were not sustainable by the incomes of the people of Michigan.

Easy money from the Fed also rots the guts of American corporations. New money goes to the most politically-connected businesses first, and funds projects that would not be possible in a free market. Because private investors haven’t actually saved enough to see the projects through to completion, and consumers don’t value the product enough to cover production costs, the companies getting free money from the government either fail or receive endless bailouts. For example, easy money encouraged unsustainable commitments like high union wages and pensions, forcing US automakers to sell cars for prices that consumers could not pay given their actual savings rate. When sales dipped in 2009, the government was forced to bail out GM, Chrysler, and Ford in 2009.”

https://fee.org/articles/how-easy-money-is-rotting-america-from-the-inside-out/?utm_source=FEE+Email+Subscriber+List&utm_campaign=ec1e231c1e-MC_FEE_DAILY_2018_02_08&utm_medium=email&utm_term=0_84cc8d089b-ec1e231c1e-107184405

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