Mark Twain once said, “To a man with a hammer, everything looks like a nail.” To the Federal Reserve — an institution employing an army of economists and academics — everything looks like an economic problem that needs to be quantitatively eased. As a result, the Fed is killing the economy.

Sir Alan Greenspan, who after he left the Fed suddenly turned into a rational and comprehensible person, said during a recent appearance on The Charlie Rose Show that businesses don’t want to invest because they are concerned about the future. I agree.

Ironically, by intervening in the free market and arbitrarily setting short- and long-term interest rates at insanely low levels, the Fed is responsible for this uncertainty, enabling and propagating speculation — not investing — and eroding confidence about the future. Usually, in investing, liquid capital turns illiquid when it is committed to a higher, more productive long-term use. The ability to forecast aftertax cash flows and discount rates is key here. Speculators, however, are indifferent to what asset they hold (junk or quality). Their time horizon is much shorter, and they are just looking for a greater fool on whom they can unload their stuff. The next tick in price is the only variable that matters to them. ....

Read More: Ben Bernanke · Federal Reserve