Tags: Investors | Zero | Interest Rate | Policy

Investors Need a Zero Interest Rate Policy Too

Investors Need a Zero Interest Rate Policy Too

Thursday, 24 March 2016 08:43 PM Current | Bio | Archive

Why is a zero interest rate good for the financial industry and government, but investors and savers must pay 18% or more on their credit cards?

There is something wrong going here.

The Federal Reserve is following a policy that because government can control the economy better than the free-market.

The government is for this purpose is solely the chairperson for the Federal Reserve. That is Janet Yellen. Before she was appointed, Ben Bernanke served.

I think it is fair to say that both can be the poster child for a basic academic economist. 

They have a mindset that thinks that theoretical data driven make believe scenarios are real. 

They see a world that only exists in charts and graphs. 

Has the Federal Reserve ever accurately predicted the economic consequences of its policies?

No. Not once.

We were told that lowering interest rates would encourage greater borrowing from financial institutions and boost asset process. This would then create the “wealth effect” encouraging savers and investors to increase consumption and creating economic growth and prosperity.

Ever consistent, the Federal Reserve got it wrong.

What has happened?

Savers and investors got zero interest on their personal and money market funds, saving account balances, and interest related retirement plans. After figuring in taxes and inflation, the effective real rate of return is negative. 

The choice faced by savers and investors is to spend money buying stuff they don’t’ want or need and which has no lasting productive value, or just watch the results of years of hard work disappear.

That loss of interest income is forever. It will never be recovered.

Buying equities is not really any better.

The financial markets are based on make believe valuations.  One could reasonably say the market pricing mechanism is fraudulent. 

Markets work when investors can freely make choices between equities, bonds, and other investment alternatives.

But with Yellen dictating that interest rates will be zero, there is no free choice, there is no free market, and there are no real asset valuations.

The equity markets are for the most part a big bubble.  At some point, something happens, and the bubble pops. 

People have been lead to believe that the Fed is there to protect the economy.

How wrong they are. 

The purpose of the Feds policy is not to stabilize the economy nor encourage employment.

Just look at the results of the Feds policy.

After 7 years of essentially a zero interest rate policy, the economy of the United States is highly volatile.  It’s unstable.

The only thing saving the United States from collapse is that virtually every other country in the world is in worse shape.  Capital is pouring into the United States even from some countries which are or competitors or avowed enemies.

Has the Fed encouraged employment?

It has been a consistent failure at this as well.

The United States labor participation rate in the United States is at its lowest level since 1977.  Making the situation even worse, the quality of jobs available are predominately limited to insecure lower paying service sector employment. 

Which politician was it that was promising good jobs at good wages?

If the Fed isn’t stabilizing the economy or encouraging employment, then why was it created?

The Fed’s real purpose is to facilitate the machinations of the Wall Street-federal government cabal. 

Just follow the money.

With zero interest to pay on debt, the Congress and the Administration use debt financing as free money. 

Wall Street is the mechanism that enables the politicians pull this off. 

What happened to all the interest earned on deploying billions of dollars of capital that should have gone to savers and investors for the last 7 years?

It kept Wall Street rich and politicians in power.

What did investors and savors get for the use of their money?

For that, they get to pay 18% interest on their credit cards. It is just galling.

Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher. To read more of his articles, CLICK HERE NOW.

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Why is a zero interest rate good for the financial industry and government, but investors and savers must pay 18% or more on their credit cards? There is something wrong going here.
Investors, Zero, Interest Rate, Policy
Thursday, 24 March 2016 08:43 PM
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