"[R]ate cuts in the late 90’s made startup capital too easy to come by and helped cause the dot-com bubble. Similarly, failing to raise rates in the past few years encouraged the wave of short-sighted, frenzied borrowing that ended so abruptly in 2007." "The Fed always keeps its eyes peeled for signs of inflation, which manifests itself primarily in the prices of goods and services. That means the Fed is keen to deflate any “bubbles” it sees in these markets by taking money out of the economy. It devotes a similar amount of attention to employment figures. Bubbles developing elsewhere, such as in the prices of assets like houses, get lost in the mix. And under Greenspan, they were knowingly disregarded." "[T]the global spread of capitalism has increased the demand for U.S. debt and thereby made investors settle for lower returns (i.e., lower interest rates). This external market force has “substantially weakened” the Fed, according to an economist in the Fed’s Dallas branch. It follows that the central bank’s reliance on setting interest rate goals first — and following up by changing the money supply afterwards — is outdated." "As one critic has noted, 'It has not been lost on the Wall Street titans that the government is the reliable first responder to scenes of financial distress, or that there will always be enough paper dollars to go around to assist the very largest of financial institutions' . . . Bear markets must coexist with bull markets in a truly free market, but the Fed seems bent on eliminating all but the upside. That might work in the short term, but not long afterwards. Moreover, it’s not capitalism at all, but a sort of 'socialism for the rich.'" "No survey of criticisms directed at the Fed can be complete without mention of the seemingly radical argument that the Fed should not exist at all. Proponents of this view, most of whom come from the 'Austrian School' of economics, believe the very basis of current monetary policy is flawed. They think all dollars should be backed by an asset like gold, as they theoretically were until as recently as the ’70s, or at least exist in the reserves of banks. The 'fractional reserve' system the Fed now oversees, in which only a small amount of the money supply can readily be withdrawn from banks, causes an artificial business cycle of 'booms' and 'busts.'