By Lowell Ponte, Special for USDR
Would the Federal Reserve keep a key interest rate at or near zero, continuing to give free money to the biggest corporations and banks, the casino known as Wall Street, and the growing Federal Government?
Business networks counted down to the economy-shaking Fed announcement: the easy cash will keep coming until at least June – and perhaps until 2017. Nobody was surprised, as we have been saying for some time.
“They’re never going to raise this interest rate,” predicted financial reporter Charlie Gasparino.
Zero interest rates may be good news for the big guys and government, but it’s very bad news for you and me. Whatever the economic system is that we now live under, it is no longer free market capitalism.
In 2008, with one major bank in ruins and several others at risk of collapse in the worst economic crisis since the Great Depression, the Fed decided to rescue us by slamming its foot pedal to the metal on its economic accelerator. To restore bank liquidity, it pushed the Fed Funds rate at which banks borrow to Zero, making money to them free.
Remember those Star Trek episodes where Captain Kirk escaped danger by accelerating the Enterprise into extreme warp? The ship sometimes found itself in an unfamiliar galaxy where the old laws of physics and economics no longer worked, and star charts no longer showed how to get home.
That’s what the Fed’s Zero Interest Rate Policy (ZIRP) did – fundamentally transform us into an economy where the big get fatter and the rest of us are given no low interest loans and get paid zero interest on our bank accounts. This “financial repression,” as economists call it, herds bank savers into the stock market for shearing.
This seems like a sweet deal for the Big Guys. But as we explain in our new free White Paper The Biggest Bank Heist In History! How You Can Avoid Paying The Price For Banks and Government Getting Free Money, it’s giving America’s economy what one analyst calls “financial diabetes.”
Free Money for Me, not Thee
This easy money lets giant corporations operate here on borrowed money that avoids the 46.3 percent average U.S. taxes on business, while keeping jobs and profits overseas. It funds the buying of robotized technologies to replace human workers. And it wrecks the incentive to save and produce.
This sweet ZIRP money is also addictive. In six years of depending on it, companies now jack up the share value of their stock not by making better products – but by the gimmick of stock buy-backs.
Government has now borrowed more than $18 Trillion, which means that if the Fed raised rates by one percent, this would raise the annual interest cost of government by more than half a trillion dollars. Normal rates in a healthy capitalist economy are between 5 and 6 percent….which might more than double what the Federal Government costs taxpayers today.
In 1913, Congress authorized the Fed to furnish an “elastic currency” to begin replacing that gold-backed dollar the “Progressive” politicians were prevented from printing in unlimited amount. The Fed was to protect the value of your dollar, which today has only two pennies of the purchasing power of a 1913 dollar.
Today, we are hooked on unbacked paper money and trapped with zero interest rates. It’s time to audit and abolish the Fed, or replace it – as Nobel Laureate economist Milton Friedman suggested – with a depoliticized computer. And it’s time to get back to honest hard money that needs no Fed manipulation to keep our economy working.