The Washington Post columnist Heather Long writes that “There’s an easy way for the Federal Reserve to stop this [economic] deterioration and prevent a recession. Cut interest rates decisively.” Long’s certitude won’t age well, nor would it have aged well 20, 30 or even 100 years ago.
To see why, consider the internet boom that defined the U.S. economy in the second half of the 1990s. Nearly 30 years ago to the day, in October 1994, Netscape (remember it?) released Mosaic Netscape 0.9. Of greater importance, 10 months later Netscape floated its shares to a rapturous public. That they soared goes without saying. And since memories are reasonably long, it similarly goes without saying that subsequent to Netscape’s landmark IPO, human and financial capital from around the world found its way to northern California. An IPO bonanza many years in length followed.
What’s rather notable about this powerful economic boom, one that profoundly transformed economic activity for the better not just in California, but in the U.S. and around the world, is that the Federal Reserve had nothing to do with it. Goodness, the Fed aggressively raised its “funds rate” 250 basis points in 1994. The rate hikes continued through 1995. Which is the point.
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