In 2008, when the real estate bubble burst and the whole world staggered on the precipice of total economic disaster, the Federal Reserve (our country’s central bank) leapt into action to try to save the economy. However, the Fed’s plan didn’t make our economy stronger; it only made the rich even richer.

In a recent episode of Pitchfork Economics, Civic Action spoke to Christopher Leonard, author of “The Lords of Easy Money: How the Federal Reserve Broke the American Economy,” about why the Fed’s plan to fight recessions rarely works. 

To hear Leonard discuss the Fed’s role in the 2008 crash, listen to our Pitchfork Economics podcast now.

The problem with the Fed’s response to recessions, Leonard says, is that it buys large amounts of treasury bills from about two dozen Wall Street firms to stimulate the economy. But the truth is, these investments only help the super-rich get richer – and they never trickle down to the rest of the country. 

To encourage real economic growth from the middle out, the Fed could create money and get it directly into the hands of the American people. For example, the Fed could buy municipal bonds at low interest rates to fund the construction of housing in expensive urban areas, or to fund the construction of solar panels on the roofs of millions of homes to create a green energy grid.

Even better, the Fed could create money in bank accounts instead of just pumping money into Wall Street. Imagine if, during the economic collapse of 2008, every American received regular infusions of cash from the Fed. That way, consumer spending would have been invested directly in communities around the country, spurring small-business growth and job creation that would have built the economy from the middle out – not from Wall Street on down.

Interested in hearing more from Leonard and the Civic Action team? Listen to our recent podcast episode, “Did the Federal Reserve make inequality worse?”

Thank you for helping us set the record straight on trickle-down policies that don’t help the American people. Together, we’ll build the economy from the middle out.

Paul Constant, Civic Action