Business Management Dynamics

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ISSN: 2047-7031

bmd Business and Management Dynamics bmd
ISSN: 2047-7031  
Volume  6   Issue 09  2017  
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Article Abstract
The Unintended Consequences of Government Intrusion into the Economy
Keywords:  bubble, Quantitative Easing, Federal Reserve Bank, bail out
Kevin Sigler, PhD
The government's intrusion into the private sector to save companies and stimulate the economy during hard times has played a major role in causing the next set of problems for the economy. Many think that the bank failures of 2008 were fueled by government actions beginning in 2001 when the Federal Reserve Bank began printing money as well as slashing its main interest rate to combat an economic slowdown resulting from the tech bubble popping. The Fed's intervention produced the housing bubble crash of 2008. The government responded to the housing crash by bailing out many of the failing institutions using taxpayer money. It also created a Quantitative Easing (QE) program to keep banks solvent and stimulate the economy through the Fed printing up trillions of dollars and buying treasury bonds and mortgage backed securities with it. This created liquidity for banks and reduced interest rates to near zero. The low rates and liquidity provided by the QE program have fueled a stock market bubble that may pop and cause numerous dislocations in the population that may surpass the Great Depression in severity. It appears that in this century when the government steps in to save companies and help revive the economy it ends up costing the tax-payers money and creates an environment to facilitate the next economic disaster.
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