Even the most ardent optimist has to confront the consequences of low interest rates. The macro analysis of ivory tower academics seldom reflects the struggle of ordinary consumers or retirees. One such pinhead is Ben Bernanke.
Back on October 1, 2012 at the Economic Club of Indiana, the Federal Reserve chairman employs sophistry of a major order. Such confused and twisted logic defies common sense and real world finance. Robert Romano writes in the article, More monetary alchemy from Bernanke: Low interest rates help savers:
“Many savers are also homeowners,” said Bernanke, adding, “indeed, a family’s home may be its most important financial asset. Many savers are working, or would like to be. Some savers own businesses, and—through pension funds and 401(k) accounts—they often own stocks and other assets.”
Bernanke explained, “Only a strong economy can create higher asset values and sustainably good returns for savers . . . [and] [t]he way for the Fed to support a return to a strong economy is by maintaining monetary accommodation, which requires low interest rates for a time.”
He said home values would collapse without Fed support, unemployment would rise, and asset values would plummet and “[s]uch outcomes would ultimately not be good for savers or anyone else.”
So, admittedly, the Fed’s easy money policies do not in actuality directly help savers. But they will increase home values, asset prices, and create jobs for savers, Bernanke claimed. Okay, but is that even true?”
Such deceptive dishonesty that the Fed fosters beneficial monetary measures, which encourage job growth and a vigorous housing market, defies evidence. The saver watches the evaporation of their money, while prices jump at rates far in excess of the official CPI. This is a fact. This construct is the legacy of the intentional 2007 Wall Street meltdown.
The inability of distinguishing between illiquid assets and the need to pay for cost of living expenses must be a trait that only financially—cash flow secure—magicians master. The perception that the masses benefit from central banking driving down and suppressing interest rates to negative levels is patently absurd. Negative Interest Rates and the Impoverishing of America by Michael R. Winther sums up the self-evident.
“Don’t forget that consumers pay income tax on interest earned regardless of whether real interest rates are positive or negative. The result is that many Americans are paying income tax on a negative real interest rate! This discourages savings and investment, but even worse, it steals from our citizens.
“Negative real interest rates hurt all savers, but these rates are especially damaging to the elderly and those on fixed incomes. It is no longer possible for senior citizens to live on the interest of their savings and investments. In fact, our negative interest rates result in a situation in which our seniors must rely on the depletion of their principle for all of their living expenses.”
The net effects of an inflationary depression require that privately saved capital must be used to pay for the continued increases in basic costs. It is not just the retired person that is shafted from zeroing out the money market. Anyone who attempts to devise a budget that sets aside a portion of cash flow understands that there is no return on banking funds.
How long will people accept this theft? The options to parking cash in hand with a FDIC insured institution seems worth an examination. However, few alternatives for working class savers exist. Surely, this occurrence is intentional because the real objective of the “New Normal” is to bankrupt Middle America. What other conclusion makes sense?
Designed lowering of our standard of living is visible at every turn. The money-centered banks recapitalized their balance sheets at the expense of the passbook accounts customers.
The recent implementation of approving an extra fee to credit card purchases is outrageous. The NY Daily News reports the example of allowing “MasterCard and Visa credit card users might see a surcharge of up to 4 percent on their receipts. Merchants are allowed to add an extra fee to credit card purchases starting Jan. 27.”
The besieged consumer gets another whammy from a banking system that thrives on charging usurious fees, while paying you near zero on your saving accounts. With the execution of the Bernanke rescue strategy, the prospects of personal or consumer loans are virtually non-existent. In Helicopter Ben speak; “maintaining monetary accommodation” just does not filter down to the common- man.
While the concept of interest often confuses some Christians, Gary North offers a scriptural analysis in Usury, Interest, and Loans: A Brief Summary of Biblical Teaching, which asks:
“If charging interest were not legitimate, why would Jesus have used the example of money-lending as a legitimate way to increase capital? Why would He have attributed to God such words of condemnation for not having lent at interest?”
The tangible injustice is that the saver is especially screwed by the moneychanger system.
When you strip away the banking veil of trickery, what remains is a stash of greed, built on a hoard of distrust and deception. Few financial policies have been more destructive for the depositor than low interest rates. Siphoning off purchasing power is a perfect method to impart a fiscal squeeze, hard to rebound for any depositor. Everyday your cash lingers in money interest limbo is another diminution in your net wealth.
How can a society encourage saving under these circumstances? Apparently, the plan for depleting the economic assets of workers or investors is well underway. The notion that investing is feasible in this environment borders on delusional.
The submissive banking customer needs to take a hard look on continuing their depositing relationship with the commercial saving establishment. The endless gimmicks and get rich schemes that proliferate might seem attractive to desperate people. Yet, when you operate on parallel tracts, separated by a wide gulf of moneymaking returns, the definitive result is that treasure ends up in the accounts of the banksters and favored insiders.
James Hall, a.k.a. SARTRE, is the publisher of BATR.org, where this was originally published.
