The President of the United States and the Chairman of the Federal Reserve System are co-conspirators in a sting aimed to relieve the nation’s thrifty creditors of their accumulated wealth, as a means of filling their own greedy political pockets, while sluicing some of the ill-gotten gains into the pockets of underserving dissolute debtors, who will hopefully campaign to keep the President in the White House, and to vault the Fed Chairman into a third term of monetary debauchery.
The sting was set in motion earlier this week when Ben Bernanke announced the intention of the Fed to keep interest rates at zero per cent for at least the next two years. Such a policy is designed for four principal purposes:
First, a backdoor bailout for failing Wall Street financial institutions who are now freed-up to access zero-priced money for two years so that they can profiteer worldwide by hedging and arbitraging across financial markets, while protecting their backsides by buying Treasury bonds. All such basically insolvent institutions should have been liquidated in September 2008, thereby cleansing the financial system of accumulated grime. Note how, President Obama’s trusted left-hand friend, Warren Buffet, is now attempting to expand his wealth by buying into Bank of America stock to the tune of $5 billion in order to channel some of those sluiced transfers into his own always-greedy pockets.
Second, to destroy the nation’s community banks, the agents of laissez-faire capitalism, who traditionally make their money the old-fashioned way, by paying their customers interest on their hard-earned savings, and by lending such deposits back to their communities in the form of venture capital to aspiring new businesses. With the Fed now setting depositors ‘ interest rates at zero, and with President Obama inducing an anti-socialist capital strike, how will the community banks make a viable margin in the markets in borrowing and lending? Will they also increasingly play the big banks’ socialist game, by borrowing from the Fed at zero rates and lending to the U.S. Treasury at 2 per cent per annum. Some statist economy that will be!
Third, a back-door bailout for U.S. households who cannot, or rather will not, balance their budgets. Low mortgage rates – yet again – for homeowners who have placed themselves under-water, diverting excessive economic resources to the construction industry. Back-door bailouts for those who have run- up excessive credit card debt, and now look to big government for a Wall Street-style big- helping- hand.
Fourth, and most satisfying of all for the two socialists who run the sting, wealth-destruction for those thrifty savers who have accumulated sufficient savings to break-loose from the socialist corset of social security and medicare in their autumnal years. With yields on ten-year bonds running at two per cent per annum, the socialist corset tightens, and even the thriftly oldies are dragged into the net of dependence on D.C.
Hat Tip: Camden R. Fine, ‘A backdoor bailout for Wall Street’, The Washington Post, August 26, 2011
Camden Fine, by the way, is a community bank owner and was president of a bank that served hundreds of community bankers for more than 20 years.