http://www.reuters.com/article/idUSTRE63C5IT20100414
It’s commonly understood that price controls are not good for the economy.
Why does no one seem to realize that the manipulation of interest rates amounts to price controls?
well duh they can’t just raise rates that would undo everything they’ve already done.
How often does the FED inject credit to keep the interest rates down?
Central banks have a monopoly on reserves, which are used as a means of inter-bank settlement and meeting reserve requirements. The central bank can either set the price or set the quantity. In America the FED sets the price. It signals its desired interest rate policy and the sets the price (discount rate) at which it will sell reserves. This can be thought of as a price ceiling.
The FED injects reserves, by purchasing specific securities from banks and crediting their reserve account by the same amount. There is no injection of credit in the sense that a net financial asset is created. Rather there is a change in the composition of assets within the private sector, that is, $100 security has been changed into a $100 of reserves. From the perspective of the private sector there is no net change.
The FED will always accommodate demand for reserves. It does this to ensure a smooth operating inter-bank payment system. If the FED did not set any rate or decided to not accommodate demand for reserves, the amount of reserves within the system would depend upon the transactions to and from the treasury; tax revenue and spending, respectively. Because these transactions are extremely volatile the banking system may find itself in a position of a shortage of reserves, when taxation revenue exceeds spending, or a shortage of reserves, when treasury spending exceeds taxation revenue. In the former case the overnight rate would increase and in the latter it would decrease. This plus the fact that banks are highly interest inelastic means that FED has no choice but to accommodate the demand for reserves.
Now as to your question:
How often does the FED inject credit to keep the interest rates down?
This can also be asked as such: How often will the FED inject or remove [reserves] to keep the interest rates at a particularly level?
The FED will engage in actions which affect total reserves on a daily basis, to ensure that the overnight rate remains smooth and does not fluctuate way from the desired rate. This as mentioned will depend upon projected transactions to and from the treasury, maturing government bonds, securities and notes, the level of bank demand for excess reserves and to maintain reserve requirements and any other factors, such as, a terrorist attack. On this last point central banks throughout the world provided their banking systems with excess reserves as they expected fluctuations in the other night rate.
BTW I might as well state that I am not an Austrian.
Do you mean not yet?
I am whoever provides the best description of the actual financial operations between the various financial institutions. I think it is absolutely critical that an accounting methodology is used. If Austrians do that, and create stock and flow consistent models, then I would consider myself an Austrian, but at the moment it seems as though another school has already and they arrive at completely different conclusions to that of Austrians. The only way to falsify what they are saying is if there is a mistake in the accounting.
AE is economics, not finance.