Interest and the Price of Pork

So this lady goes into a butcher shop and asks how much the pork chops cost.  The butcher replies, “$2.50 a pound.”  Outraged, the lady protests, “But the butcher shop across the street advertises them at $1.50 per pound!”  The butcher says, “When we’re out of pork chops, we sell them for $1.50 per pound too.”  This tale illustrates Adam Smith’s “invisible hand” and shows how the market forces of supply and demand affect prices.  Today both the Federal Reserve and U.S. Treasury want to keep interest rates low; they want to keep the price of money down to promote spending and lending.  But they are also being forced to increase the amount of bonds offered for sale because we’re broke and must borrow to meet our promised obligations.  This increase in supply drives bond prices down as the market demands cheaper prices for more and more of the same.  That drives interest rates up.  I know treasury bonds aren’t the same as pork chops, but pursuing this policy doesn’t make it kosher.