Culture Wars Era - is it moving into its final phase?

[Warren Dew]

(01-29-2017, 10:57 AM)David Horn Wrote:

(01-27-2017, 05:36 PM)Warren Dew Wrote:

(01-27-2017, 03:49 PM)X_4AD_84 Wrote:

(01-27-2017, 01:35 PM)Eric the Green Wrote: The prime rate and the interest received on bonds and money market funds is still near zero after 8 years. Of course that does not stop the corporate credit sharks from gouging the people.

Another thing. After the crash of '08 regulations came into play forcing more conservative reserve requirements on banks backing the cards. The way they helped allocate into the reserves was by increasing the spread between the prime and credit card interest.

True.  But the flip side of that is that the money was forced into supposedly zero risk reserves, namely US government obligations.  Seen another way, it was a way to force banks to fund the deficit at below market interest rates.

After the 2007 meltdown, the Fed pushed money into the banks to make them reliably liquid. This continued throughout the QE period, with banks getting stuffed full of cash. They decided that the amount of interest they pay (a pittance) can be more than offset by returning the money to the Fed, and placed in interest bearing accounts.  So basically, the Fed is giving the banks an unearned income stream.  You may wish to consider that as a topic for complaint rather than forced purchase of government obligations.

Actually, I already complained about that, too, five years ago as it was happening:

http://psychohist.livejournal.com/50763.html

at the same time that the fed did the first round of quantitative easing, they also started paying interest on reserves, including excess reserves.... Basically the banks can sit on the cash and make some money perfectly safely, without having to worry about making loans that might go bad.


... Before doing more of the same and hoping for different results, maybe the fed needs to cut back or eliminate that risk free interest that they're giving the banks.

Of course, that would mean Bernanke would be making his friends in the New York banks do their jobs and figure out how to make loans to people likely to repay them while avoiding loans to people who are likely to default. Why do that, when he can dump more money into the system and keep his banking pals on the government dole, instead.