[xapata]

> It seems to me that the widely accepted practice of market stimulation by interest rate intervention has the cost of destroying price discovery. Also, that it is a primary cause of wealth inequality.

Those claims deserve an explanation and empirical evidence.

Measuring price discovery itself is a bit awkward. You could say that poor quality price discovery would result in more price volatility, and that increased costs of price discovery would result in lower liquidity. Unfortunately, both of those things have many other causal factors. How would you untangle the causes to isolate the effects of interest rate intervention?

Making the leap to saying it's the primary cause of wealth inequality is absurd. So long as society uses a market economy, or allows any form of individual wealth aggregation, wealth is likely to follow a log-normal distribution.

[smallnamespace]

The proper operation of monetary policy (which you can verify by cracking open any macroeconomics 101 textbook) calls for the central bank to control interest rates via the creation and destruction of money, such that the interest rate in the market for money (via fixed income instruments) always remains at an equilibrium rate.

The Fed failed to effectively create money in ‘08 and afterwards, and instead settled for more or less directly controlling the price of fixed income instruments. This is bypassing the textbook cause and effect mechanism and is indeed the equivalent to a price control in the fixed income market.

You can see negative effects by realizing that price controls always widen the gap between the marginal borrower vs. non-borrower — in a ‘true low rates’ scenario, loans would’ve been freely available at the low rate, but in post-Recession US, loan rates were low, but only strong borrowers could get liquidity. That directly widens the gap between the haves and have-nots, and was a direct result of Fed policy.

[xapata]

Asset inflation is exacerbating inequality, but to say it's the "primary cause" isn't supported.