WASHINGTON, DC - JULY 24: (L-R) U.S. Sen. Tim Scott (R-SC), President Donald Trump and Federal Reserve Chair Jerome Powell tour the Federal Reserve’s $2.5 billion headquarters renovation project on July 24, 2025 in Washington, DC. The Trump administration has been critical of the cost of the renovation and Federal Reserve Chairman Jerome Powell. (Photo by Chip Somodevilla/Getty Images)

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No matter what the Federal Reserve does, credit will flow at market prices.

Economic religions, particularly Milton Friedman’s (1912-2006) monetarism, continue to promote the fiction that the 1930s (and every downturn since) was a consequence of a tight Fed, while monetarism’s faux opposites in the Austrian School continue to promote impossible notions (yes, fiction) about central banks creating “excess credit” on the path to endless inflationary booms. Keynesians are more focused on government spending as the source of economic growth, but when Ben Bernanke was politicking for the Fed Chairmanship in the early 2000s, he threw Friedman a bone with the absurd admission that “we did it,” as in the Fed caused the Great Depression. Gag.

What’s important is that it’s all nonsense. Just as OPEC can’t keep the oil of its member countries out of the United States, just as the U.S. can’t keep its advanced semiconductor chips out of China, and just as China can’t keep its rare earths out of the U.S., so can’t the Federal Reserve “tighten” access to credit in the United States.

Production is what attracts all four market goods, regardless of what governments do. Just the same, a lack of production is the only barrier to attaining any of the market goods. Translated, short of the federal government strangling U.S. producers, resources will find them. Always.

We see the overwhelming fatuity of the Federal Reserve narrative through the rise of private credit, along with near-term struggles in the private credit space. As the Wall Street Journal observed about private credit during more flush times for it, “Its once-obscure business of lending directly to businesses has boomed in recent years while banks have pulled back from making risky loans.” Stop and think about what you’ve just read.

For one, the prosperity of private credit in years passed gained steam during stretches when the Fed was at or near zero with its Fed funds rate. At the time, more than a few pundits who really should know better (Ruchir Sharma comes to mind) claimed against all reason and empirical logic that “When the price of borrowing money is zero, the price of everything else goes bonkers.”

Except that the price of borrowing money was never zero. We know this first because price controls don’t work, second because the power of compounding is far too evident for those with title to money to loan it out for nothing, and third because private credit found the wind beneath its wings when the Fed was at zero.

In other words, the banks that the Fed vainly attempts to manipulate the U.S. economy through were surely lending at low rates, but that was a sign that banks were being exceedingly careful with the funds entrusted to them. So, with banks extra careful, private credit and other sources of same worked around the Fed’s vain stab at price controls.

Considering all this through the prism of today, we see from private credit’s near-term struggles just how toothless the Fed was, and is. While a low Fed funds rate logically coincided with rather tight banks lending solely to the bluest of blue chips, credit that is always and everywhere produced in the private sector continued to flow.

Where there’s production there’s always credit. Rising credit doesn’t instigate growth as the various religions tell you, rather it’s an effect.

Private credit’s days aren’t over exactly because so long as there’s production, credit will find it. As with the Strait of Hormuz, private credit couldn’t care less about the Fed.