What If The Federal Reserve Has It All Backwards?

bmoreland's picture

The Fed spends an inordinate amount of time focusing on increasing Lending with the idea that loan growth increases economic activity. Is it possible that the Fed may have it backwards and that it is Interest Income derived from Savings that is more important to economic growth?

Simply put, Banks fundamentally exist to provide two services to society:
1) Lending: a place where borrowers can go to get money to purchase goods or services.
2) Saving: a place where savers can go to put money in return for interest income.

From a societal perspective, which is the more productive service? Historically, Lending & Saving would happily co-exist finding an equilibrium. Since 2009 the Fed has been decidedly in favor of increasing Lending as shown by the following chart.

Federal Funds Effective Rate since 1955:


In the 645 months from January 1955 to September 2008 the Fed Funds rate fell below 1.00% only 4 times - 3 of those during mid-1958. In the 597 months from January 1959 to September 2008 it dropped below 1% only ONE time (December 2003).

In the 69 consecutive sub-1% months since October 2008 the Fed Funds rate has been below 0.20% 63 months. For 13 straight months the rate has been below 0.10%. 

Clearly, the Fed is focused solely on Lending growth with this unprecedented approach. So, what has this done to aggregate bank loans? 

Federal Funds Effective Rate v. Total Bank Loans & Leases:


The orange line is Total Bank Loans & Leases in Trillions while the purple series is the Fed Funds Effective Rate from the earlier chart. Three things come to mind viewing this chart:

1) In June 2004 the Fed Funds Effective Rate was at 1.03% and the aggregate Loans & Leases stood at $5.79 Trillion. For the next 2+ years (9 quarters) the Fed "tightened" by increasing rates to 5.26% while the Total Loans & Leases rose to $7.29 Trillion. Tightening had virtually zero impact on slowing Lending levels.

In fact, running a correlation function on the Fed Funds Effective Rate and Bank Loans & Leases on the 2004 Q2 through 2007 Q1 time period reveals a 0.99 relationship. An economist might draw the conclusion from this period that raising rates leads to more loans.

The data might support the idea that rising Interest Expense pushes Banks to lend more to increase Interest Income. Lowering rates to 0% encourages Banks to minimize Interest Expense and invest Deposits into lower yielding, but less risky MBS, Munis or Treasuries. 

2) Loans climbed another $700 Billion before topping out at $8.01 Trillion when rates were once again dramatically being cut and sitting at 2.00%. From the left hand side of the chart I see nothing that would lead a Central Banker to assume that lowering interest rates increases lending levels.

3) In December 2008 the Fed Funds Effective Rate stood at 0.16% and Total Loans had dipped to $7.89 Trillion. Over the course of the past 5.5 years we have seen the Fed Funds rate stay at nearly zero % while the Total Loans figure has climbed a mere $45.38 Billion to $7.93 Trillion. Once again, from the chart I see little relationship between lower rates and increased lending levels.


5.5 Years of near 0% Fed Funds Rates, what's the impact been on Savers?
Anyone with a checking account, a savings account and/or CDs knows that the past 5 years have been punishing to say the least. One of my favorite "complete waste of time" analysis I've done recently was to determine that it takes holding $50,000 in a Wells Fargo High Yield Checking Account for 1 year to generate the $15 necessary to handle one (1) Incoming Domestic Wire Transfer. Yes, that's Incoming Wire Transfer - what used to be free at 95% of the banks a decade ago.

Analyzing the hit to savers is complicated and requires a couple of assumptions. First off, let's review a chart of CD Rates History from Bankrate.com.  



The chart details that CDs Rates have been coming down for three decades. What's most disturbing is that each recent "peak" is lower than the prior cycle's "trough". Please take a hard look at the 2006-08 period and note that on this chart the 6 month, 1 year and 5 year data points for that time frame would not be considered high from a historical basis. 

There are 4 Call Report categories where we can find Funding Costs associated with Savers: 
1) Transaction Accounts:  Interest Bearing Demand Deposits, NOW, ATS...
2) Savings Deposits:  Savings Accounts including Money Market Accounts
3) Time Deposits > $100,000:  jumbo CDs
4) Time Deposits < $100,000:  non-jumbo CDs

Funding Costs are what banks pay as an annualized percentage for a particular Funding type - the flip side of this is the Yield to the holder of the account. 

Let's take a look at the Funding Cost % for Time Deposits < $100,000 since 2005:


If we assume that 3.01% is a reasonable blended CD yield for amounts less than $100k we find that holders of these CDs have lost out on $58.64 Billion in cumulative interest income since 2009 Q1. The 3.01% figure is what banks paid out in 2009 Q1 and, as shown on the prior Bankrate.com chart, is not at all out of the realm of reasonable had the Fed not gone to near 0% on the effective rate. 

As a reminder, the $58.64 Billion in lost interest income easily exceeds the $45.38 Billion in net additional Loans & Leases since 2008 Q4.

Funding Cost % for Savings Accounts since 2005:


Once again, the 0.60% is a reasonable, conservative estimate of Savings Acounts yields based upon historical data. What we find here is that Savers have lost an additional $87.28 Billion since 2009 Q1. 

We're now up to $145.92 Billion in lost interest income to Savers from just Savings Accounts & CDs < $100k. Add in Transaction Accounts ($3.57 Billion in lost Interest Income) and Time Deposits > $100k ($46.91 Billion) and we're up to $196.39 Billion in lost Interest Income since 2009 Q1. 

Well, not really, the more likely number is near $305 Billion in cumulative lost Interest Income to Savers since 2009 Q1. The reason for this is that Savers' behavior changes as a result of rates. 

U.S. Banks' Deposit Mix by Savings Type:


In 2009 Q1 63.50% of Deposits were in either Savings or Transaction Accounts meaning 36.50% were in CDs. The 3.04% for Time Deposits < $100k and 2.52% for Time Deposits > $100k represent the blended Yield being paid in the 2009 Q1 quarter. As the CDs aged and came up for renewal fewer and fewer people re-invested in CDs and instead moved the money to Savings & Transaction Accounts. 

In 2014 Q1 83.73% of Deposits were in Savings & Transaction Accounts meaning the CD percentage fell to 16.27%. For the 4 largest banks the CD percentage has fallen to just 9.14%. As rates paid out on CDs has fallen dramatically Savers have opted to keep the money in Transaction and Savings accounts. For example, here's what I can get from Wells Fargo in Dallas:

Gotta love the fact that Wells is pushing a 6 month CD as an initial 9 month CD with a 6 month renewal. A 58 month CD at 0.50%? With these terms and yields Savers are pretty much being pushed out of the CD market. I'd also put forth that with these rates the large banks are no longer what we'd traditionally define as a "Bank" since there really is no "Saving" component to their business model. 

You can see from our Asset Size analyses section of each metric (Savings, Time Dep > $100k and Time Dep < $100k) that most banks below $50 Billion in assets (to their profit disadvantage) are attempting to keep rates higher.

How did I get to the $305 Billion in lost Interest Income since 2009 Q1?
I calculated the weighted average percentage by Savings Deposit Type from 2003 Q1 through 2008 Q4. This represents what the deposit mix might have been had CD rates stayed the same from 2009 Q1 onward. From the earlier Bankrate.com chart we know that this period corresponded to the lowest (till then) CD rates on record.

For each quarter since 2009 Q1 I then multiplied the most likely Deposit type levels (Mix %) by the rates paid out in 2009 Q1. Here are the rates and Interest Income figures by type: 

For Savings Deposits banks actually paid out a cumulative $69.516 Billion from 2009 Q1 thru 2014 Q1. Had the rate been 0.60% (instead of the actual 0.26% - and 0.14% for 2014 Q1) and had the Deposit Mix % (from 2003 - 2008) stayed the same 52.06% then the total interest paid out would have been $130.912 Billion. The $61.395 Billion difference for Savings Deposits and $304.635 in aggregate represents what Savers lost out on in Interest Income. 

Banks as Investors in Securities are hurt as well.

Up to now I've focused solely on lost Interest Income for those with Deposit savings. At $9.9 Trillion for 2014 Q1 Deposit Savings is actually just a fraction of the MBS and Treasury markets. The next chart details interest rate yields from Bank MBS Holdings and what the extra Interest Income would have been since 2010 Q2.

Yield for U.S. Banks' Mortgage Backed Securities:

Assuming a normal interest rate market (and no QE) it's not unreasonable to say that MBS rates might have averaged 3.95% for the past few years. In that world, banks would have generated an additional $69.23 Billion in additional Interest Income. 

Treasuries (at 2.43%) would have generated another $14.51 Billion while Other Securities (at 3.68%) would have generated another $26.17 Billion. In total, U.S. Banks have likely lost out on over $109 Billion in Interest Income since 2010 due to the Federal Reserve's focus on driving rates down to generate more lending. 

The $109 Billion is just a fraction of the total since the vast majority of Securities are not held by banks, but rather Life Insurance Companies, Pension Funds, Mutual Funds, University Endowments... Combining Savers and Bond Investors we're most likely well past $1 Trillion in lost Interest Income due to the Fed's actions. For what? another $45.38 Billion in net additional loans and a bunch of refinanced mortgages? Well, cheaper government financing and "lower" budget deficits is one upshot.

Tax Receipts are negatively impacted from lower rates.
If the IRS had a seat at the Fed table I suspect they would vote for keeping a healthy interest rate environment. Interest Income generates tax receipts at the State and Federal level. If we're truly looking at $1 Trillion plus lost Interest Income in the past 5.5 years then the IRS has most likely lost out on $200+ Billion in lost taxes.

Every student in an MBA program since the early 80s has been taught "corporate debt is good, corporate debt is good" because the tax code allows corporations to deduct interest payments from income before taxation. To prove the point, Commercial & Industrial lending on Bank books has grown $437 Billion in the past 4 years. During that time all other lending types have shrunk $9.4 Billion. 

BankRegData.com | July 10, 2014



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kurt's picture

I want all my foregone interest on saving lost to the artificially low paid interest. A also want reimbursal for funds lost due to the lack thereof, that is principal withdrawls made necessary for failure to pay proper interest for my savings.

Fed, assholes, you owe me.

AdvancingTime's picture

Savers are suffering from these low interest rates.The leading edge of the massive Boomer generation knows that every dollar spent is a dollar it cannot re-earn or replenish. The logical thing to do is hoard their wealth. Boomers have little choice but to, keep the car for an extra 50,000 miles, cancel remodeling projects, and make the grand-kids fund their own education. With less interest income they are purchasing  a lot fewer electronic gadgets and spending vacations in the backyard.

Tens of millions of Americans are either in this position now or about to become so. The '60s created a generation of hedonists that changed the mores of the nation. The early 21st century is creating a generation of misers that will change the spending habits of the country, as a result of these low interest rates this "recovery" may be greatly delayed. More on this subject in the article below.


JRobby's picture

What if ????

They do have everything backwards.

If loans to the "most creditworthy" corporations are growing, those corporations are not using them for infrastructure/CapX etc. They seem to be using them for acquisitions it would seem. Not activities that stimulate growth and jobs.

If the Fed/Comptroller of the Currency etc. were doing their duties as specified they would have broken up the TBTF's and allocated the assets and liabilities to other entities and thrown all of the bad assets into a Resolution Trust type of entity.

Instead it is all swept under the rug and the Fed takes on "liquifier of the world" status.



toadold's picture

Manufacturing has been doing a slow death due to lack of investment in more efficent equipement.  Between taxation of corpertations, depreciations rates set by a brain damaged monkey, and the hidden inflation which is just another tax. The add on of shortage of captial to buy new equipement even when it would increase productivity has pretty much carpet bombed the manufacturing industry in the US. 

Oh were, oh were, is my large blanket and aluminum baseball bat.  I want to throw a party for the FED.

kchrisc's picture

The Rothschild FedRes central bank has nothing "backwards."

They say what they will to cover, promote and continue their ponzi.


"In response to this article, I turned my guillotine so it is now 'backwards'."

kurt's picture

We're going to need a bigger basket.

novictim's picture

The state of the economy in the 1930s was one of broke consumers and fabulously wealthy oligarchs who paid little taxes.  Trickle down economics = low taxes on the rich industrialist and low interest rates for their borrowing.  

Along came Keynes who proposed that the economy should bedriven from the bottom up and not from the top down as was the prevailing model of the time.  FDR, seeing that trickledown economics was a failure as low interst rates and low taxes failed to increase industry as the industrialists could not sell product to a broke populace, took Keynes up on this new way of looking at things.

A better standard of living for the working class became the focus.  The rich were then taxed heavily.  Money from these oligarchs and from tariffs on imported goods was funneled into creating a new prosperity for the middle class and the economy BOOMED! for the next 30 years.

The only thing keeping us from repeating this today and having a "New Deal" is the drive by the OLIGARCHS for ever low taxes.  ZH and the libertarians are the flunkies for low taxes on the wealthy and for free trade and no tariffs.

just sayin'

J J Pettigrew's picture

Absolutely CORRECT.

Fake rates destroy the velocity of money.  And low interest rates REMOVE the

economic force to the middle class spending disposable income.  A consumer with

disposable income IS the greatest engine...and the FED has taken much of it away...

They have it backwards....but they are so smart...who will tell them?


novictim's picture

Start with this understanding:

Lending is meant to foster productive enterprises. Production is supposed to be matched to consumption.  Low interest rates should stimulate the growth of industry as money for capital investments is cheap.

So the real story is not that borrowing is weak when interest rates are paradoxically low.  That is very explainable.  The real story is that we should pursue a policy to increase production when we have 20% overproduction and an army of underpaid consumers who are broke.

The rate of interest from central banks is always a response to what the economy is doing.  So when we see interest rates raised or lowered we have to understand the state of the economy as perceived by the Fed/central bank.  When the economy is too "hot" then rates go up.  

That is a fundamental of Supply Side economics.  And when it is in the shitter then rates go down.  

Fluctuating interest rates ideally put the brakes on the economy when it is heading toward unsustainable booms and overproduction/insufficient demand and puts the gas petal down when demand is exceeding supply.  This is also an element of the "trickle down" economic approach.  

Look, this article is GREAT!  It dances around the fundamental element of capitalism which is that capitalism is not stable but goes through a natural pattern of boom and collapse.  We are in a collapse.  Economic approaches that acknowledge this have been discarded in the USA and most oligarch controlled economies but the truth is staring us in the numbers themselves.

Trickle-Down economics as a failed policy is the story.  Beating this dead horse is the story. 

I wonder if the author gets this?  A KEYNESIAN approach that focuses on the consumer is what we are missing.

shovelhead's picture


We need more central planning for boomier booms and bustier busts. More Ivy League experts should do the trick.

And grease up that printing press because we're going to print up LOTS of growth because Trillions just ain't enough.

We'll just pay it back later when GDP growth hits 20%.

Let's build a bridge to Hawaii and call it the Obama Expressway.

Shovel-ready Union jobs.


novictim's picture

Now shovel, the point is to cut off the booms and shore up the busts so that we stop the extremes.

What you really are saying, I think, is that a planned economy is a bad thing.

From that it follows that you think a laizzez faire, "free Market" dog-eat-dog, big fish-eat-little-fish situation is preferable.  How about telling us why you think that?

  Do you confuse planned economies with totalitarian political systems?  I suspect so.  

You think "USSR" when I say Keynes which is crazy-wrong and ahistorical.  You should think "NOrway" or "Sweden" or "Germany".

Please explain your principles and then we can discuss them.

WSP's picture

The argument you make in your article makes sense; however, it make sense only when viewed from the common consensus that the Federal Reserve is incompetent---a meme they want people who recognize their fraud to believe.  In other words, the problem with your assertion is that it is based on the premise that the Federal Reserve has the public’s interests in mind which they do not.  Instead, the Federal Reserve’s apparent “incompetence” is what they want anyone who questions their corrupt, criminal enslavement of the population to believe lest they recognize the Federal Reserve for the true evil leviathan they truly are.

The fact is the crime syndicate we refer to as the Federal Reserve is not incompetent but instead are evil, conspiring, corrupt, criminal thugs who know exactly what they are doing and are doing an excellent job of it.   The bottom line is as long as those “awake and aware” believe the Federal Reserve is incompetent rather than disciples of Satan the scam will continue ad infinitum.

The bottom line is the population will not rise up against this evil leviathan until they understand that the Federal Reserve is not incompetent, but rather, hates humanity and enjoys enslaving them for their own corrupt criminal self-interest.   Authors need to continue to publish articles demonstrating incompetence for those who want to believe the thugs at the Federal Reserve are incompetent; however, those truly aware of the evil intentions of the Federal Reserve crime syndicate must continue to uncover the pure evil that underlies all of their apparent incompetence.

novictim's picture

Your thesis appears to be that evil people are doing mean things.  

And that we need to stop the meanies.  

Very concise and reasoned thinking, WSP.

JRobby's picture

Wake up. When greed, power and self gratification regardless of how it effects others is your only motive, Satan is at work.

novictim's picture

Ohhhh, Satan...  Riiiiight, gotcha.

Bear's picture

I agree with your assessment that the FED knows what they are doing, but their motive may be far less nefarious ... they are greedy bastards who's job it is to maximize banks profits and insure that the Banksters (Banking Families) stay on top

WSP's picture

Bear, your assertion that their goal is less nefarious would make sense if you do not look at the Fed's other manipulations into politics to get certain people elected, etc.  The Federal Reserve carefully craft the 2008 market takedown to get Obama in, and if you go back to the months leading up to 2012 you can see the manipulations once again.  The fact is you could argue they simply wanted politicians they could easily manipulate in; but they can do that with either side of the aisle since they own all of them.  Putting Obama and the other thugs in was a "reward" for the political takedowns of the 1990's under the Clinton administration.  The rat hole between the Clintons, Goldman Sachs, JP Morgan, and the Federal Reserve is deep, and I am not even political.

No, the evil at the Federal Reserve is much worse that even I can report---if there is such a thing as disciples of Satan they certainly are---if not Satan himself!

honestann's picture

Manipulating the economy and finances and well-being of every human being on earth in order to enrich their owners (large financial corporations and historical banking families) is an extremely damn nefarious act in my book.  And they are indeed doing that.

However, they are ALSO doing everything they can to completely dominate and control every government on planet earth, and shape their agendas... which is ALSO massively nefarious activity.

The fed is just plain evil in every way imaginable.

buzzsaw99's picture

on a bank balance sheet loans are assets, deposits are liabilities. if you were a bank maggot bent on making a bonus which one would you kick right in the nuts?

Attitude_Check's picture

In real terms, the banks are paying negative interest -- even using the bogus hedonically adjusted CPI.  So the banks are getting paid for these "liabilities".

lasvegaspersona's picture

Maybe it is all just an effort to support a currency at the end of it's life cycle.  Maybe every thing that has been offered as an excuse is just to hide that fact.

Vooter's picture

Well, of course they have it all backwards. The point is, they have it all backwards ON PURPOSE.

the grateful unemployed's picture

during the S&L crisis rates were high, lending was low, and savers were draining the banks balance sheet (and a lot of that money was diverted to the Contras in Nicaragua.) the fed is the foreign policy arm of USG since the 80's, together with the EU they are running the war in Ukraine right now. they have financed the war on terror, which is why GWB took a week to vette Bernanke and made him attend cabinet meetings and made him travel to China. (Obama didn't care much for the fed furniture but it took him six years to make a change, and that had to be approved) fed policy is synonmous with US foreign policy. John Kerry is just a messenger boy, with a sack of money. this is why Paul wants to audit them. what a joke, its like auditing Al Capone.

QQQBall's picture

FED is a private bank that supported its own. The FED's blueprint was to recapitalize the financial system; higher asset prices lowered leverage levels and reduced defaults as well as default risks. It has been an epc wealth transfer = from savers to over-leveraged entities, particularly banks.

The USSA borrows money and then essentially buys the debt. What could go wrong?


novictim's picture

The article starts with this preposterous notion:

"Simply put, Banks fundamentally exist to provide two services to society:
1) Lending: a place where borrowers can go to get money to purchase goods or services.
2) Saving: a place where savers can go to put money in return for interest income."


Those two items are just their tools.

We all know what is REALLY fundamental!  Profit.  The "fundamental" function of a Private Bank is to maximize profit.  

Who does not know that?

But the societal function, as perceived by the FED and central banks, is that banks should:

1) Provide provide stored capital (stored in the form of future success) for investment/capital outlays.  

2) Banks spread the risk of any single enterprise in the economy amongst all the others which is their other "fundamental" function.

So much for this perfect world picture.  Reality is what we all see.

Banks today and at times in the past have adopted a purely self serving attitude. It is the fees and the profit that our current banking culture is all about.  Banks are now run by folks who care very little about the health of the society/economy and Bank CEOs no longer see themselves as responsible to anyone other than the Board and shareholders and the profit that is sought.

shovelhead's picture

Holy Cow!

There are no Mother Theresas in bank boardrooms! Go figure...

Personally, I would be happy enough if they didn't engage in criminal and fraudulent activity  and expect to be bailed out when they bet wrong.

novictim's picture

I know, shovelhead.  What I posted was pure pablum.  I am striving to maintain a air of righteous disgust in the "bad people" who don't pretend to carry someone else's cross.  I am hoping to ingratiate myself in this way into this libertarian camp. Through these simplifications and villifications I might get a tiny audience who can actually learn a few things I slip in the side.  

Is it working?

Mercuryquicksilver's picture

Yes. I've learned that a central planner can better determine my worth than the aggregate of all mankind. I propose that you become the central planner as it is clear to me that you know what is best.

dizzyfingers's picture

"...theFed should be tried and convicted !"


Pee Wee's picture

Liquidating savers and risk averse is the point.

Biggest heist in the history of mankind.

Grouchy Marx's picture

Outstanding analysis, and a compelling contrarian view.

While it has been obvious that the Fed's policy has completely disincentivized saving (as an investment), your analysis provides a very cogent quantifying of the greater impact on the economy.

Kudos! I enjoyed reading this very much. 

Notsobadwlad's picture

The effect of not paying interest on people's savings is to decrease the safety net, which then negatively affects long term spending.

The effect of financializing the country and eliminating value adding work is to decrease money velocity.

Together these effects are designed to destroy the middle class turning them into a powerless debtor class and elevating the financial class above them as their slave masters.

Because money is free to the banks through its creation out of thin air, the banks have no need for people's savings, can pay nothing for the savings, make the savers dependent slaves to the banks and over the longer term destroy the people. With infinite money the banks can and do create inflation, esclating asset prices, which then puts goods and services out of the reach of the masses. Ad a result, the masses, including the middle class, spend less and become dependent slaves to the financiers ... who buy up all valuable assets at the higher prices with their free money.

Look at what is happening, not at what their lying words say. No one should be fooled into believe that this is not by design.

mraptor's picture

If you include compounding into the mix, then the number will get even bigger ...

Felix da Kat's picture

QE infinity is here to stay. There is no alternative except allowing a colossal, worldwide, mega-depression.

Felix da Kat's picture

QE infinity is here to stay. There is no alternative except allowing a colossal, worldwide, mega-depression.

financialrealist's picture

I agree, will be thru back door channels, but the headline number reported thru the media will be 0. 

financialrealist's picture

They’ve absolutely got it backwards, their ZIRP policy has created structural problems within the market itself which is why no matter what, they are “exiting” QE, at least on the surface.  The primary thing ZIRP accomplished is wealth transfer to the top of the financial food chain (but I take solace in knowing their days are coming to an end) while decimating the very demographic responsible for getting them there. In short, ZIRP has led to wealth inequality, negative structural impacts to the capital markets, structurally higher unemployment, and suppressed real economic growth, each one of which carries a laundry list of problems in and of itself.  

moneybots's picture

"What If The Federal Reserve Has It All Backwards?"


The FED doesn't have it backwards, the FED has it fraudulent.


Bernanke wrote in 1988 that QE DOESN'T WORK.  To massively QE in light of that is to commit massive financial fraud.

HardAssets's picture

Lots of pretty charts & tables . . . but the author doesn't seem to 'get it'.

(Its encouraging that so many ZHers do understand.)

The job of the Fed is to serve their owner/masters - the banksters. Their job is to facilitate the robbing of the rest of the population by these banksters and by their paid off politicians & bureaucrats.

This robbery is accomplished through long term counterfeiting of fiat (which is an unbacked fraud) - which destroys purchasing power. Another method of robbery is by blowing up various 'asset' bubbles and then later pricking those bubbles. They make out like bandits going up and going down.

They 'finance' government by 'loaning' absolutely nothing. Then they & their  politicians can rob from the public treasury in various creative ways. That's why you hear of $600 toilet seats being sold to the government. They also collect interest on this made-up-out-of-nothing 'public debt'.  Their lawyer/liar/politicians wrote the 'law' so that all financial transactions must use their fake fiat instruments - a violation of the US Constitution. (They own the judges too. When you control the 'money' system - you can control everything.  At least for awhile.)


The Most Interesting Frog in the World's picture

No, the robbery occurs when one particular generation has collectively chosen to vote themselves a bunch of cushy benefits for themselves and their government masters while trying to pass on their debts to future generations.  

Generating "wealth" by keeping the assets and letting the government hold the liabilities for your children to pay is not "wealth" generation.


The baby bomers are thieves and losers for impoverishing future generations.

The Most Interesting Frog in the World's picture

And stop blaming bankers.  We don't blame the gun dealer for a murder, do we?  Why blame a banker for financing an entire generations benefit free-for-all.  Start with the wealthiest as they benefitted the most from the Ponzi scheme and work your way down.  All the debts can be paid down, lower taxes, and there will be plenty of money left for those that truely need a safety net.

sdmjake's picture

Actually, i think the author had it 'better figured' when he wrote this article 3+ years ago: http://www.zerohedge.com/article/interest-rate-wealth-transfer


financialrealist's picture

Agree here as well, but you have to make the assumption their intentions, however misguided, were for the benefit of the greater economy and general good. Anything else, as you suggest, involving fraud perpetrated at this scale, requires a firing squad, starting at the knee caps and working your way up…

Vooter's picture

"Agree here as well, but you have to make the assumption their intentions, however misguided, were for the benefit of the greater economy and general good."

Why would anyone with 1/128th of a brain EVER make that assumption?

nostromo17's picture

The FED has done nothing for lending except pretend it was doing something with resounding success since the media in general just repeats and amplifies the lies. All it did was print a lot of money to shore up bank balance sheets on paper since they were all broken after the mortgage bullshit bubble popped.

Interest income certainly plays a part, but artificially low rates to try and manage goverment and other debt means no lending will happen because its not worth it.

The ship sank in 2008 and the FED has done its best to maintain the country in a state of denial where the problem doesn't and won't go away.

Stay tuned for reality emerging into consciousness (perhaps) someday. Although we all live in the reality if we just look around.

The FED should be dead. That's a good start.


magne13's picture

Hey the analysis is great and it proves a lot, but the point is well known and what it it does prove is that Keynes was right, thru inflation governments confiscate and the Feds job is to make sure the 0.1% continue to make the rest of the people debt slaves, because if u can't get a job and you can't buy anything then u r on welfare, if u have a job and can't afford to live u get credit cards run up to make up the difference, so actually the Feds are succeeding in their job quite well, Americans can bitch and moan all they want about change, but if they were serious they would just pull all of any savings out of banks or institutions. Until then the fed will continue to suppress both interest rates and the working class

swass's picture

I think people misunderstand the actual function of the Fed.  Their primary objective is to pimp credit.  So the fact that they would be trying to increase lending is perfectly in-line with what their primary function is. 

Duc888's picture



"Simply put, Banks fundamentally exist to provide two services to society:"


I got some news for ya flash, third sentence in and you're already wrong.  "Fundamentally" wrong..

Banks are corporations.  Corporations are formed to make profits.  Ya know, corporate bylaws and all that stuff.  No point in reading any more of this article.

People don't form corps to provide a service, otherwise everything would be free.  People form corps to make a profit.

Duude's picture

So, you can't provide a service unless its done for free?  LOL!  That's some fine socialist vision there.