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The Euthanasia Of The Saver
Submitted by Eric Matias Tavares of Sinclair & Co.
The Euthanasia Of The Saver
What have been the economic consequences of ultra-low interest rates? The answer might not be as hopeful as you may think.
While better known for the role of government in stimulating the economy, John Maynard Keynes, one of the most influential economists of the 20th century, also provided the intellectual framework for a big reduction in interest rates with two goals in mind: to reduce economic inequality and to achieve full employment.
Here’s what he had to say about the “rentier” (a quasi-Communist term for “saver”) in Chapter 24 of his seminal book “The General Theory of Employment, Interest and Money”, published in 1936. It requires some effort to go through it (and even more to comprehend it, if at all) but because it influences so much of the current economic thinking it is worth it [our emphasis in bold]:
“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
(...) Since the end of the nineteenth century significant progress towards the removal of very great disparities of wealth and income has been achieved through the instrument of direct taxation — income tax and surtax and death duties — especially in Great Britain. (…) For we have seen that, up to the point where full employment prevails, the growth of capital depends not at all on a low propensity to consume but is, on the contrary, held back by it; and only in conditions of full employment is a low propensity to consume conducive to the growth of capital.
(…) The justification for a moderately high rate of interest has been found hitherto in the necessity of providing a sufficient inducement to save. But we have shown that the extent of effective saving is necessarily determined by the scale of investment and that the scale of investment is promoted by a low rate of interest, provided that we do not attempt to stimulate it in this way beyond the point which corresponds to full employment. Thus it is to our best advantage to reduce the rate of interest to that point relatively to the schedule of the marginal efficiency of capital at which there is full employment.
(…) I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision.
Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.
(…) I see, therefore, the rentier aspect of capitalism as a transitional phase which will disappear when it has done its work. And with the disappearance of its rentier aspect much else in it besides will suffer a sea-change. It will be, moreover, a great advantage of the order of events which I am advocating, that the euthanasia of the rentier, of the functionless investor, will be nothing sudden, merely a gradual but prolonged continuance of what we have seen recently in Great Britain, and will need no revolution.”
Indeed, no revolution was needed. Interest rates have generally declined over the last 30 years. However, the latest (last?) phase of this decline has been largely caused by unprecedented intervention from the world’s leading central banks in the form of ultra-low interest rates and successive rounds of quantitative easing, where trillions in primarily government securities have been purchased.
As a result, capital has been cheapened indeed. At this point there are almost €3 trillion worth of European bonds that have negative yields. If he were alive today, Keynes would no doubt be applauding all of this and giving high fives to his central bank followers.
Now, in the 1930s, with the Western world reeling from the effects of the Great Depression, perhaps it was understandable that a leading economist should became enamored with the virtues of central planning in lieu of the "cumulative oppressive power of the capitalist", particularly when glancing over the propaganda of the Fascist and Communist regimes of those days and their impressive (and false) economic achievements.
But policymakers today, with the benefit of hindsight, should have known better. At the very least two lost decades in Japan should have been sobering enough.
Well, six years after the implementation of ultra-low interest rate policies on both sides of the Atlantic we should have enough data to figure out whether they are working or not.
And so far, neither of Keynes’ objectives has been achieved: employment growth since the 2008 crisis remains uncharacteristically sluggish, despite substantial gains in asset prices, and income inequality has surged to the point of concerning even Federal Reserve Chair Janet Yellen (actually, we were blown away by how similar what she had to say about this topic is to what Keynes described in the aforementioned Chapter 24).
So who is benefiting from these policies?
In November 2013 the McKinsey Global Institute published a very insightful discussion paper titled “QE and ultra-low interest rates: Distributional effects and risks.” It should be required reading for anyone with an interest on this topic. As a teaser, here are some of the graphs that highlight major income distribution consequences of central bank intervention since 2007.
Estimated cumulative change in net interest income (USD bn, converted at constant 2012 exchange rate): 2007–12
Source: McKinsey Global Institute.
According to McKinsey, governments and non-financial corporations have been the primary beneficiaries of ultra-low interest rates. Why? Because they are the largest net borrowers in the economy.
And borrowing they did, with government debt ratios rising sharply over the period; no good Keynesian would have used this extra cash to repair government finances. Not to be outdone, corporate managers also levered up, using the proceeds from debt issues to buy back their shares - lots of them, which has been one of the pillars of the big equity bull market we are in.
The impact on the banks varied greatly depending on geography: American banks have largely gained from low interest rates, British banks have suffered losses as a result and in the Eurozone they have been hugely detrimental to banks’ profitability.
The ones who have undoubtedly lost out were those quintessential Keynesian villains: the savers. These include pension funds and life insurance companies, households and foreign investors. The medicine prescribed by the central banks to correct their “bad” ways has cost them billions. And given that yields have continued to go down since McKinsey's report was published, their misery has only increased. More high fives from Keynes!
And yet, even within those groups the impact has been uneven. Who in the household segment is suffering the most because of ultra-low interest rates? The retirees, of course.
The following graph shows just how disproportionate this impact has been in the US:
Annual net interest impact for the average US household (USD bn, % 2007 income)
Source: McKinsey Global Institute.
And there you have it. It is the “baby boomers” who have suffered the most as the result of ultra-low interest rate policies. These folks worked hard all their lives, created the most prosperous generation the world has ever seen and now they are rewarded with virtually nothing on what they managed to save over the years. Try explaining to them that on top of that their central banker wants to prop up the inflation rate - in other words, what they pay for goods and services.
Keynes, as far as we can tell, did not explicitly factor demographics into his theory of employment. Depriving an ageing population of the income they earn on their accumulated savings will leave them with less funds available for consumption.
What is a retiree to do? Keep on working. According to the BLS, in the US the only group which has managed to increase its employment-to-population ratio is the 65 years or older, going from 20% in June 08 to 23% in March 15. In comparison, men aged 16-64 decreased from 81% to 77% and women aged 16-64 from 69% to 66% over the same period.
But the younger ones are not only facing greater competition for jobs from their elderly; they may also need to step in and take care of them at some point. Furthermore, their pension plans are not doing that great either. While the value of the assets which have been invested for their retirement has gone up, so has the discounted value of the bills they will have to pay (lower interest rates = higher present value).
Surely none of this can galvanize their "propensity to consume", as claimed by Keynes. And neither will be paying for all those government debts to stimulate the economy.
So how do hardcore Keynesians react to all this evidence?
Like they always do: claiming the reason why such policies are failing is because they haven’t been as robust as they should be. We need more and with more vigor! Therefore, you are now hearing talk about even lower negative interest rates, taxation on deposits and banning cash transactions.
It seems like they don’t want you as a saver just euthanized; they want you buried as well.
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Once the NWO eliminates cash for peasants, no need to worry abouts savers.
What amazes me is that we're still running our economy on the ideas of long-dead and FAILED economic ideas. We dig up Keynes, Marx and others and shake their dead bones around the room and that passes for legitimate economic policy.
Maybe those who don't learn from history are doomed to repeat it. But those that do nothing but cling to it's dogma are it's slaves.
In a fiat world where certain players are TBTF the natural risk-free rate of return will ALWAYS BE ZERO. Your savings ARE NOT NEEDED TO FINANCE INVESTMENT ANYWHERE ELSE. New money is printed as needed to finance whatever the elites decide to do- war, highways to nowhere, social programs, whatever. Saved money is "dead". It sits there and slowly (or quickly) depreciates to worthlessness.
That's because the ideas aren't failed. No, in fact, quite the opposite, they've been incredibly successful for the assholes that use them.
A failed idea is one that leaves TPTB with less money and power, not more. By that metric, gold is a failed idea, which explains certain posturing around that particular metal.
Fair point. I just get so exasperated sometimes I can't believe anybody buys into this bullshit any more. It's like we crystalized economic thought sometime around 1920. Sure, it gets tweaked and expanded and people earn their PhDs for it, but the whole thing is immensely boring because you KNOW it's going to fail in the exact same ways it did 100 years ago. But everyone's OK with that, even knowing it's obvious failings. Does anyone try thinking about it from a different direction? Hell fucking no.
You know what happens when the current system is failing and there's nothing even on the drawing board to replace it? The Dark Ages. Which is where we're headed. The modern Dark Ages. Just like the first one but with iPads.
When it happens, the only iPads will be the ones that are already built. The entire supply chain of tech requires so much precision and support that it'll be impossible under even modestly austerity.
The CRAZY World Of Negative Interest Rates
I believe "modern" economic thought has an intense hatred of the marketplace. It's aim is to manage the natural market driven cycles into a managed equilibrium held together by "economic gods".
Economics have become like the worst of the medical profession, Drs with a god complex, in this case Economists with a god complex, but without the delivery of at least partial success....
And I bad mouth Drs as pompous god complexonians; economists are far worse.
Your name says it all. And thats a compliment. My hope is that you are younger than me so you can communicate your message. So sad, but every lesson learned by the greatest generation has been lost. Stay debt free, savings feed the real economy, etc, etc. Unfortunate. But the lesson will be re-learned again. The hard way. And there is no keynesian that can stand in the way. Hope I can see Krugman on the cover of a TIME Magazine begging for food with a Nobel Prize in his hand in my lifetime. Might not be in the cards given my age.
The stock market has never been this high since the DOT COM boom ==> http://www.bit.ly/1fMcakI
We have low interest rates, the porn industry is booming, bernanke has his own phucking blog, the govt is printing money like never before.
TPTB are dooming us form the start. We are like the skinny dude in the shower who has dropped his soap. The big black man behind us smiling. We all know where this one ends up!
WE ARE SCREWED people!!! Royally up the tail pipe. But the worst thing is its all planned, it always has been, just like the 2008 crisis. only a matter of time, before the next 2008 ....exect the next one will be alot worse.
You have discovered the road we are all traveling down partner.
See you at the bottom.
Keynes was a socialist, a Marxist. His idea, like that of the Bernankes and Yellens, was to destroy the greatest enemy of the Marxists, the middle class. Thus, with a single stroke of a pen, the Rothschild banker cabal created the Federal Reserve System and arrogated to itself the power and right to create paper fiat money, using that power to seize the wealth and the savings of America’s middle class.
Yet the wealth of a nation depends upon the wealth of its people.
And the wealth of the people depends on steady income from jobs – good jobs that have now been moved to the Third World for the sole profit of the oligarchs. Before Keynes and the Federal Reserve, the philosophy of government in America “encouraged integrity, rewarded initiative, and fostered prosperity for the nation and its people. And the nation prospered as its people created wealth.”
Continues W. Clement Stone: "Wealth is created through the positive mental attitude, education, labor, knowledge, know-how, and moral character of people, under a government that guarantees freedom of private enterprise and respects and protects the live and property rights of each individual. The important ingredients for its acquisition are thought, labor, raw materials, good credit, and fair taxes. Money, or the medium of exchange, must have a recognized and acceptable value.”
For a people to be self-builders, they must be able to save money to acquire wealth: “If you cannot save money, the seed of success is not in you.”
That is the Horatio Alger dream that the Fed has destroyed by confiscating the private property of Americans, using paper money loans to finance the hostile takeover of America as a prelude to offshoring and destroying American opportunity.
As for the “wealth of nations,” Stone wrote in 1962:
“When you compare the rich nations of the world with the poor, it is apparent that the wealth of a nation is not due to natural mineral wealth, oil, lush vegetation, favorable climate, good harbors, and a plentiful supply of inland waters. It is primarily due to the inspired thought, knowledge, know-how, and labor of its people. Natural resources are only potential wealth. Just as knowledge is to power, but only potential power, natural resources are not wealth until converted.”
America's success lay in her positive climate for success, anchored by a government that guaranteed the enforcement of laws to preserve the freedon of private enterprise, that protected the life and property rights of each indivdual equally.
The Federal Reserve System, in its lust and greed and zeal for a one-world socialist Keynesian state, has destroyed America's formula for success; it has destroyed Americans' means of acquiring wealth from within.
In its place is a government that acquires world Empire through the conquest of other nations and the enslavement of their people.
Crap. Keynes was no Marxist - he was a Bloomsbury Liberal. He wanted to navigate between Mussolini and Stalin in years when the US was seduced by Father Coughlin and Huey Long
Some men are builders. Keynes was a destroyer, perhaps the most dangerous destroyer of any so-called economist who ever lived.
What did Keynes mean when he said that making capital freely available “may be the most sensible way of getting rid of many of the objectionable features of capitalism. The rentier [lender or investor or holder of rental properties] would disappear…and [so would] the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital”?
It is Marxism except that the lender rather than the business owner is the villain.
Henry Hazlitt said about Keynes’s passage:
“This, of course, is a naked class theory of the business cycle…strikingly similar to Marx. As with Marxism, the tacit assumption is that these government policies are necessary to protect the poor and discomfort the rich. but as also with Marxism, there is the pose that morality has nothing to do with it; that the existing ‘system’ just won’t work and must break down.
“The chief difference between Marxism and Keynesianism is that for the former the employer is the chief villain, and for the latter the lender.”
Socialist Pierre-Joseph Proudhon (1809-1865), best known for his statement that “property is theft,” according to Hunter Lewis, “also invented the idea of ‘credit gratuit,’ free loans, the very idea which Keynes promotes.”
And it was Keynes who praised Sidney and Beatrice Webb’s book Soviet Communism: A New Civilization? What we think is failing economic policy is actually successful policy in the eyes of Keynesian economists such Bernanke and Yellen.
It may be "crap" but the theoreticians who drafted the IMF/World Bank’s manipulated paper standard were none other that Fabian Socialist John Maynard Keynes and America's Communist Assistant Secretary of the U.S. Treasury, Harry Dexter White.
As for the Fabian socialists, as you know the most revealing component of the Fabian crest is a wolf in sheep’s clothing.
Here are some comments regarding the Fabians to get your started:
“The Fabians were an elite group of intellectuals who formed a semi-secret society for the purpose of bringing socialism to the world. Whereas Communists wanted to establish socialism quickly through violence and revolution, the Fabians preferred to do it slowly through propaganda and legislation. The word socialism was not to be used. Instead, they would speak of benefits for the people such as welfare, medical care, higher wages, and better working conditions. In this way, they planned to accomplish their objective without bloodshed and even without serious opposition. They scorned Communists, not because they disliked their goals, but because they disagreed with their methods. To emphasize the importance of gradualism, they adopted the turtle as the symbol of the movement.”—G. Edward Griffin, 1994.
The hidden agenda behind the IMF/World Bank - world socialism - is the same agenda that the Federal Reserve now is bringing about.
But those that do nothing but cling to it is dogma are it is slaves?
Funny, I don't feel euthanized.
Maybe I should convert my savings back into fiat and go into debt ;-)
No /sarc tag?
Never use em, if people don't know how I think by now theres no hope for them in anything I say...lol.
Couldn't agree more. You get it or you don't.
Thank you.
- Janet Yellen
Euthenasia isn't painful. What the banksters have done to savers is more akin to being repeatedly assraped by a syphlitic serial killer just before he tortures you to death.
That does sound painful.....
Rentier means 'investor', not 'saver,' exactly. And even more, he's talking mostly about renting land, which is the example he cite.
Which is actually pretty specific here: "that the euthanasia of the rentier, of the functionless investor, "
And Keynes even says here:
"short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision."
He acknowledges that there should be something paid out. Not nothing.
He's not arguing for what we have now. What we have no is far worse than he would have argued for, IMO.
Neo Keynesian <> Keynesian.
Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.
I have to disagree with you on that buddy. Pretty clear Keynes was talking about both.
He also suggests that the most valuable component of any good is the labour component, which is complete hogwash.
Russians pay 16% on deposits.
No need to save .... there's a booming demand for "Throwers" and "Bus Driver" jobs paying six figures annually.
Fucking faggot cocksucker Bernanke. Fuck You Ben I'll piss on your grave
He loves fucking the lower/middle classes over for some dick sucking Bohemium Grove faggots. He is an evil evil man.
May that be very very soon.
Fiat currency is slowly devaluing to the point of nothing on a 100 year time line. People will wake up to see there last penny of purchasing power gone overnight.
As long as the government(Fed) can print all the fiat they want, you will never see that "overnight" end during your lifetime.
NIRP will kick the green shoots down to a accelerated hard landing. Deployment of Bank of International Settlements emergency chute slides are optional.
This is PURE speculation on the part of Keynes...and yes in theory looking at current observations would appear "capital formation" has been now been "subsumed" as a State function.
But look!
The State is going bankrupt not Capitalism!
Apparently "Keynes left that part out!!!!"
Oh, no!
Our theory is just that! And wholly impractical as well!
Quick! Back to the science lab everyone!
This analysis is spot on and tells us all we need to know. The real economy will continue to struggle and asset prices will continue to balloon higher for the time being.
I save my unpaid bills. I'm not sure why.
Sooooo turns out the monetary policies implemented by those in control only benefit those in control at the expense of everyone else?
I'm shocked! Shocked I tells ya!
Oh well, who could have known? I am sure this is just a mistake cause they did it with our best interests in mind. I know because that's what they keep telling me.
Perhaps the problem is they have not yet done enough, more will probably do the trick, lets try that...
Keynes is a much mis-understood economist, as Rand is much mis-understood philosopher. Keynes knew that exponential growth was essential to a fractional reserve system, while Rand knew that socialism was essential to centralized control of the resources that support said exponential growth, and that it would never work.
They were both right- but in the end, neither was taken seriously. The end result is where we are today.
Y'all know this is a Shemitah year, right? Yeah, I know, it's just occultist bullshit, no?
Ms. LaGarde alluded to a meltdown with numerous references to the number 7.
Whether the 7 year cycle is actually a physical phenomenon or not is immaterial- the Zionists abide by it, so it is real.
Hold on to your hats.
A pedophile and an adulteress...
Intellectual authenticity.... maybe not...
Ad hominem - the cheapest of logical fallacies and the sign of an intellectualy bankrupt man.
A frightened, intellectually bankrupt man, at that.
Did I ever say I was perfect? No fuckin' way!
I am as flawed as any being that ever walked this earth.
It's them that can't admit their flaws that want to judge me.
I say fuck 'em!
If we continue at ZIRP plus the stock market inevitably someday reflects corporate earnings which is in a secular decline everywhere - then the real estate single family house cannot be maintained by the oldest people with high real estate taxes unless they liquidate principal and insurance policies and the young are getting squeezed both by student loans and low wages - who buys the houses once the stock market breaks ?
the old will be forced to give up the property with the high overhead and SS being cut and pensions cut due to ZIRP as well
the property tax equation cant hold - something will give
this is not just euthanasia for rentiers but for 10's of millions of people
:(
im in my mid 20s and about to go GALT
any young person in the work force today is working to pay for these old fucks and their pensions and their well-being..at the expense of their own well being
Do it. It's hard as fuck, but possible.
...trouble is, you really should've started a few years ago. But what's that they say about planting a tree? The best time's twenty years ago, the second best, today. Only difference between you and John is that as a member of the managerial class, he didn't have to lift a finger to "depart" the system. You, however, will likely push your back to the point of breaking in the process. How bad do you want it?
Savings is soooo Middle Class. TPTB no longer need the Middle Class as it existed.
In the future, it will consist of Gov Workers and Professionals. Current Middle Class is gradually being demoted to Serf/Servant class.
Hedge and plan accordingly.
The Inner Party, the Outer Party and the Proles...
"The Euthanasia Of The Saver"
No, it is the plunder of the American people. Followed by murder, as witnessed by the brutality of the banksters serving gun and badge thugs.
Liberty is a demand. Tyranny is submission.
The baby boomers. Worked hard. All their lives. On what fucking planet?
On this one they happily squandered their children's inheritance---or what might have been had they had children---counting on Uncle Sugar, company pension plans and home equity loans to make up for it. They paid for their party by selling their children into tax and debt peonage. Who the fuck was supposed to cover their Social Security and pension checks? Santa Claus?
As far as it goes I'm all for euthanasia of the rentier. On the contrary, if Obamacare had actually provided for death panels to decide which boomers to put down like old dogs who'd had their day, it would have been the best idea anybody in DC would have had in generations.
It's the "euthanasia" of the workers I'm worried about, if you call making them so miserable they stop reproducing a "good death." Or is the merciful part neglecting to gas us and be done with it?
The class war is real enough. The rentier's winning. And if he has anything to do with it he'll be the one ordering a robot to shove us into a gas chamber, not the other way around.
Are economists fast asleep on here?
Printing money (often in secret) and bank loans (printing money by another name) are the ways that savers lose their money, as each Dollar or loan created out of thin air dilutes (devalues) the currency (total money supply) by that amount. Plus you're paying back usury on BIS fiat currencies (which always compounds and you can never ever pay back as it is always interest on top of the principle amount) or loan interest which is always way higher than the base rate.
Against those printed loans, valuable assets are secured, which the banksters take on inevitable default. Simply by creating electronic money from nothing, and paper contracts - they get free cash, valuables and interest!!!
Interest rates are only a smaller rigged part of the story, and what idiot savers put all their money into a bank, instead of into a profitable land, business or property venture? If you don't have at least 75% of your cash in land, business or property, you deserve to see it erode away.
That's not quite right. Yes, bank loans dilute the value of money in the short term (more money, same goods and services), but the borrower has to repay the loan. How? By (producing and) selling something of the same value. In the longer-run (i.e. the term of the loan), this brings the quantity of money and quantity of goods and services which can be bought with it back into balance.
If the borrower defaults, the bank doesn't get anything free. Remember, when a borrower was given a loan and spent it, the bank had to hand over some of its own FRNs (or equivalent). If it doesn't get them back, it makes a loss. Selling whatever secured the loan will only partially or fully compensate for the loss – it's certainly not a profit.
The wealth produced to pay the 'loan' (money created out of thin air) goes to the bank who did next to nothing (except take their drawing allocation at Libor interest rates - virtually zero or in most cases actually zero if truth be told). The debtor, yes, may create something useful for their labour. If the loan was to build a house at just over cost + a small margin, the 'loan' is useful, but it never is cost + small margin, it is always cost + big inflationary bubble margin, a grossly inflated margin the banks profit from. If the loan is spent on non-productive goods or this bubble margin, then this creates an inflationary potential.
On default, the bank gets usually 75% of the asset value at auction, either cars, houses or land, in a free market. The bank writes-off the 25% it cannot recover, either through moving it off the balance sheet (where the size of desparity cannot be absorbed) into another entity - such as a 'bad bank' or a corporate patsy; another electonic bail-out loan to cover (again interest free) or a bail-in, if the 'drawing rights' are exceeded, this is not an exhaustive list.
Please let's not forget, that after the accountancy practices have worked, the bank is sitting on say 75% of the original 'money', printed out of thin air, which though you are correct, is diluting the money supply by that amount.
I agree with you in principle, but there are tricks around your explanation, valid though your's certainly are :-) but thank you for raising these points.
I have to disagree with your first point. The wealth produced to repay the loan goes to someone who has some money. For example, if I borrow $500 (to buy a smartphone), I spend it at my local store. The money is now out circulating in the economy somewhere. Then I sell something, perhaps my old car, for $500 to someone else in the economy, not to the bank. That money is then paid to the bank to clear the loan. The wealth (the car) goes to the buyer of my labour. If you take interest into account, I have to sell a little more, and the bank gets to use the interest to buy something in the economy. See my diagram and description.
There is certainly a problem with banks hiding their losses in the case of widespread defaults, and then with governments bailing them out i.e. stealing it from someone else to repair the bank's balance sheets, but fractional reserve banking per se does not give banks a free lunch.
" ‘Do not imagine that you will save yourself .... Even if we chose to let you live out the natural term of your life, still you would never escape from us. What happens to you here is for ever. Understand that in advance.
We shall crush you down to the point from which there is no coming back. Things will happen to you from which you could not recover, if you lived a thousand years.
Never again will you be capable of ordinary human feeling. Everything will be dead inside you. Never again will you be capable of love, or friendship, or joy of living, or laughter, or curiosity, or courage, or integrity.
You will be hollow. We shall squeeze you empty, and then we shall fill you with ourselves.’ "
-- George Orwell, _Nineteen Eighty-Four_
All true, and if you consider the following facts: the aging nature of most populations; the fact that many grey hairs have some savings which they live off; the deteriorating real wages of the vast majority of workers; the 'real' unemployment figures; the declining retails sales i.e. consumption, there is an argument that low interest and therefore savings rates is actually holding the economies back rather than helping. Old people who grew up in more modest and less consumerist times will never just run down their capital as is the hope of the Number Ones, they will just clamp up, not spend and hope for better times.
Truman - If you are a young man, you are way ahead of your generation. Congrats. I am "Old people" and what you describe is exactly what I have been doing since Obama arrived in the White House. Everyone ("Old people") I know are following the same plan. Looking for a job? My companies once employed 45 people - Jobs all gone now. Others I know ("Old people") discarded thousands of jobs. Reason: "DON'T NEED THE CRAP". Again, if you are young, your contemporary "the world owes me a livin" generation may never figure this out. They will never realize they only get what they earn. Pity.
The Prudent are punished...
The IMPRUDENT are rewarded by Central Bank decisions.
One might wonder if this is backwards....
Nothing more than a giant FUCK YOU to the baby boomers from the wealth redistributive people who run the Fed and the govt.
Interesting is that the Central Planners and the government people retire with massive pensions and cost of living adjutments to insulate them from inflation and low interest rates
Banks used to need savings so they could lend out the money ... and make the difference in rates.
NOW, the G just prints the money...and the saver is left holding his joy stick.
The prudent are punished by the DEBT machine that Pax Americana has created under its $ hegemony as imposed by Friedman model intiated in 1971 and nailed to the Oil monopoly in 1973/1974 by Dear Henry. Get your facts and time line right.
Our money your problem became the "Shahada" of this monetary construct, the Pax Americana mantra that rules the world, ALL based on recycling Arab money; aka US/first world debt guaranteed by the Treasury note; managed by Fed and its crony banks via WS and City shenanigans. The age of Reaganomics and Thatcherism followed.
WTF has this got to do with Keynes who was against the USD hegemony (his idea being the Bancor) and who only proposed the government feed demand side model in the face of supply side collapse due to then Oligarchy's irrational exuberance of 1929 (concomitant to the demise of imperial pound and social pains of Versailles treaty aftermath; aka the demise of european empires in the making and the rise of fascism).
You guys keep beating the obscurantist drum of Oligarchy manipulation, by raising the ghost of a man who died in 1946!
False nosed logic worthy of delusional Pinocchio.
You are identifying the tip of the dinosaur's tail, and calling it the dinosaur.
All of what you mentioned actually started in the 19th century. At the end of the 19th century the Bank of England was very over-leveraged. Confidence alone allowed it to maintain the pound sterling, and the Gold standard. But the writing was on the wall. It was only a matter of time.
So, in 1907 the Bank of England raised rates in a recession. Meanwhile the London, Gold Stocks were low, and delivery was slowed (sound familiar??).
So what does this mean? Autumn was when the autumn agricultural shipments departed, and caused low-points in the money supply, because the money would be payed out to shippers. The people in the US spent most of their money -paying gold - for the shipment to Europe. And Europe would then pay in gold for the food they received.
Except, London delayed payment for what they received, and raised the interest rates on loans. This 'sucked the money' out of the US because US producers HAD ALREADY PAYED for shipping of products...but HAD NOT YET RECEIVED PAYMENT for that production. Then they had to pay a high rate to borrow money (which they should have been payment not a loan!!!).
In this way, the Bank of England and the Rothschild banks in London essentially bankrupted the New York bankers JP Morgan and entities like the Rockefellers.
So...US people had to borrow money from people who owed them money...at a high rate of interest. Crazy! But London was organized into a cartel, such that banking policy could be synchronized, while the US had no central bank, no banking cartel. This meant that the US could not reciprocally raise rates, such that London would be forced to deliver the owed gold as payment, rather than as a loan at interest.
Anyway...with the Morgans and Rockefellers bankrupt, the Rothschilds and Warburgs stepped in to offer a helpful hand...with conditions. The conditions of keeping the Morgans and Rockefellers out of bankrupcy was that the Morgans and Rockefellers must use their influence with Congress to create a PRIVATELY OWNED central bank, formed by an irrevocable trust (despite the fact that such trusts had been illegal for 30 years).
The plan was completed in 1910, at Jekyll Island, Florida. And the bank was created, despite the constitutional requirement that only silver and gold could be accepted as money.
The Federal Reserve was created on December 23, 1913 (two days before Christmas!!!)
The British Empire suspended the Gold Standard in preference for fiat bank notes (Currency and Bank Notes Act) on August 6, 1914.
The first Federal Reserve Bank opened on November 16, 1914.
From that moment, we were in a Bank-Note-Money World run by the Bank Note King...Lord Rothschild. Since he controlled the currency, from that moment he could respond any attempt to return (or to keep) a real Gold Standard by raising interest rates, and calling in his gold loans in gold...sucking the gold out of any gold standard, while giving paper in return.
THAT was why Britain never managed to return to a Gold Standard in 1925.
THAT was why President Roosevelt illegally suspended the US Gold Standard in 1933. (Neither President nor Congress had that power as it would have required a Constitutional Convention.)
Bretton Woods was NOT A GOLD STANDARD, but only a convertibility window at an arbitrary exchange rate.
And THAT is why you have fiat, arbitrary, currency today.
The name of that fiat, arbitrary currency changes - from Pound Sterling, to Dollar, to SDR? But its nature, and the identity of those who control it DOES NOT CHANGE.
I feel that I am being vivisected (dissected alive) rather than euthanized. Like the U.S. airmen shot down over Japan and captured alive in 1944 and '45.
Captured American airmen were frequently subjected to vivisection experiments. In July of 1944 on Dublon Island in the South Pacific, a surgeon used American POWs for a particularly ghastly experiment. Eight POWs were subjected to tests in which tourniquets were applied to their arms and legs for periods up to seven and eight hours. Two of the men died from shock when the tourniquets were removed. They were then dissected and their body parts were tested for various maladies. Their skulls were saved as souvenirs by the principal surgeon. In another episode in May and June of 1945, eight American airmen were vivisected at Kyushu Imperial University, one of Japan’s most prestigious medical schools. Lungs were removed from two of the prisoners. Other victims had their hearts, livers, and stomachs removed. Still others, their brains and gall bladders. Of course, none of the eight survived. - See more at: http://www.crimesofwar.org/a-z-guide/medical-experiments-on-pows/#sthash...
www.dailymail.co.uk/news/article-3031706/EXCLUSIVE-didn-t-know-vivisecti...
Nothing new under the sun.
Just a repeat of a ghoulish tale about kings and shards :
King Henry II of France got his eye punctured during a tournament joust when his opponent's lance splintered. As he was dying in great pain his court surgeon vivisected many a condemned man destined for the gallows (8-10 in all) in a desperate attempt to learn how to operate the king's eye and remove the deadly shard.
The surgeon failed and the king and his "fall guys" all died.
For want of a capable surgeon the battle was lost!
The death of King started a forty year war of succession in France all about God and heresy (but in fact about change in dynasty). It cured the French of their blind love for God and it inspired the Tv media of US four centuries later as they re-enacted Dynasty in Dallas or wherever...
I'm sure we could blame that on Keynes as well !
Keynes was Chairman of one Insurance Company and president of the Finance Committee of another so I suggest your view that he would have approved of negative bond yields as being ridiculous.
Keynes was in a country broken by the First World War and without the financial strength to sustain the Gold Standard so he could hardly have advocated NIRP or ZIRP.........it was US economists who pushed that because they had a financial system big enough to tax the rest of the world which Britain did not when Keynes was writing........
This stupidity emanates from the USA and is neither Monetarist nor Keynesian it is Opportunistic to satisfy Wall Street
It is not too simple to say that all this is directed toward one goal - to have the state make all the decisions and that when the decisions are made and the plunder flows in, Keynes and his ilk will be there to receive it.
And therefore, ZeroHedgers ought to swear off, once and for all,
this nonsense of yammering about "excessive income equality",
as the *only* proponents of such "problems" are exactly the bastards who enact this Keynesian Crapola!
Learn from these mistakes, fer Chrissakes!
Reading Keynes, only one overwhelming image comes to mind, to such degree that it often overwhelms the text itself.
I see bubbles, bubbles, everywhere bubbles.
The man clearly did not understand the difference between productive and unproductive enterprise...ergo, that if you make things that no one wants or needs you have not failed to 'make money' but instead, actually destroyed it.
That lack of comprehension is implicit in his view of savings and income equality. It is the foundation of his thinking.
It is apparent that he truly believed that you could make an economy by alternately digging and filling-in ditches. (unproductive labor)
THIS IS WHY SAVERS ARE PUNISHED:
At the end of the 19th century the Bank of England (Reserve Currency) was very over-leveraged. Confidence alone allowed it to maintain the pound sterling, and the Gold standard. But the writing was on the wall. It was only a matter of time.
So, in 1907 the Bank of England raised rates in a recession. Meanwhile the London, Gold Stocks were low, and delivery was slowed (sound familiar??).
So what does this mean? Autumn was when the autumn agricultural shipments departed, and caused low-points in the money supply, because the money would be payed out to shippers. The people in the US spent most of their money -paying gold - for the shipment to Europe. And Europe would then pay in gold for the food they received.
Except, London delayed payment for what they received, and raised the interest rates on loans. This 'sucked the money' out of the US because US producers HAD ALREADY PAYED for shipping of products...but HAD NOT YET RECEIVED PAYMENT for that production. Then they had to pay a high rate to borrow money (which they should have been payment not a loan!!!).
In this way, the Bank of England and the Rothschild banks in London essentially bankrupted the New York bankers JP Morgan and entities like the Rockefellers.
So...US people had to borrow money from people who owed them money...at a high rate of interest. Crazy! But London was organized into a cartel, such that banking policy could be synchronized, while the US had no central bank, no banking cartel. This meant that the US could not reciprocally raise rates, such that London would be forced to deliver the owed gold as payment, rather than as a loan at interest.
Anyway...with the Morgans and Rockefellers bankrupt, the Rothschilds and Warburgs stepped in to offer a helpful hand...with conditions. The conditions of keeping the Morgans and Rockefellers out of bankrupcy was that the Morgans and Rockefellers must use their influence with Congress to create a PRIVATELY OWNED central bank, formed by an irrevocable trust (despite the fact that such trusts had been illegal for 30 years).
The plan was completed in 1910, at Jekyll Island, Florida. And the bank was created, despite the constitutional requirement that only silver and gold could be accepted as money.
The Federal Reserve was created on December 23, 1913 (two days before Christmas!!!)
The British Empire suspended the Gold Standard in preference for fiat bank notes (Currency and Bank Notes Act) on August 6, 1914.
The first Federal Reserve Bank opened on November 16, 1914.
From that moment, we were in a Bank-Note-Money World run by the Bank Note King...Lord Rothschild. Since he controlled the currency, from that moment he could respond any attempt to return (or to keep) a real Gold Standard by raising interest rates, and calling in his gold loans in gold...sucking the gold out of any gold standard, while giving paper in return.
THAT was why Britain never managed to return to a Gold Standard in 1925.
THAT was why President Roosevelt illegally suspended the US Gold Standard in 1933. (Neither President nor Congress had that power as it would have required a Constitutional Convention.)
Bretton Woods was NOT A GOLD STANDARD, but only a convertibility window at an arbitrary exchange rate.
And THAT is why you have fiat, arbitrary, currency today.
The name of that fiat, arbitrary currency changes - from Pound Sterling, to Dollar, to SDR? But its nature, and the identity of those who control it DOES NOT CHANGE.
So... what is happening to China right now?
What is the condition of the London Gold pool now?
Which reserve currency is signaling a raise in interest rates now?
Now do you understand?
This is not about nations.
It is about a banking family, founded on theft, and intrigue.
So to sum it all up. Who needs the stinking saver's money when we can just hit print. And by Printing we get to charge interest, rather than pay it to the savers.