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Thursday, August 11, 2011

Federal Reserve Zero Economic Growth Policy

The Federal Reserve announced they were continuing their "Zero Economic Growth Policy" until at least mid-2013. They are calling it "Zero Interest Rates".

"Zero interest rates" doesn't actually encourage economic growth. Actually, I should have called it a "negative growth policy" instead of "zero growth policy".

The Fed Funds Rate is 0%-0.25%, while true inflation is 20%-30%. This is a huge State subsidy for the banksters. The banksters are borrowing at 0%, and buying tangible assets or lending to other insiders. With 0% interest rates, the banksters are practically guaranteed to profit.

Why would banks lend to individuals and small businesses? They can speculate in Treasury debt and make a guaranteed profit. They can lend to large corporations, with the ever-inflating value of the State monopoly as collateral. Why should banks take risks financing the productive sector of the economy?

The CPI is far less than true inflation. This causes inflation to be misreported as economic growth. By increasing the inflation rate, that will increase the measured "inflation-adjusted" GDP rate, while actual economic activity decreases.

Suppose that inflation is 100% and the stock market goes up 50%. State comedians say "Hooray! The stock market went up 50%!" They ignore the fact that the gains are less than true inflation.

Gold continues to crush the stock market. If you measure stock returns in gold rather than FRNs, then the stock market is obviously a losing proposition.

By keeping interest rates at 0%, the Federal Reserve is not "stimulating the economy". In reality, the Federal Reserve is subsidizing the parasite sector of the economy at the expense of the productive sector.

When Ben Bernanke keeps interest rates at 0%, he isn't spending his own personal money. He's spending the people's money, creating to new money to finance 0% interest rates. Zero interest rates aren't free. Everyone else pays for it via inflation.

1 comment:

DC said...

It also subsidizes me!! (or at least steals less). As a result of this policy the interest I am paying on my home loan is exactly 3.00 percent this year (the loan is a one year arm). That is kind of astonishing! It looks like it will be this way for some time.
Too bad the savings do not equal the increase in town taxes.

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