We just reported about how the European Central Bank has instituted negative interest rates for member banks. This could soon spread to the US and also to consumer accounts. If so, you would find money taken out of your bank account each quarter unless you spend it.
The idea is that if low rates are not yet persuading you to spend, then why not punish you even more for saving? To make this more effective, there would also be a push for all electronic money to keep you from stashing any away from the confiscation agents. Ken Rogoff, leading Harvard (and Republican) economist has just recommended this as a first step toward implementing negative interest rates in the US.
This is far from the only “innovation” that could be coming our way. In a speech on June 4, San Francisco Fed Chairman John Williams suggested that the Fed should consider “nominal income targeting.” He said this could be “a creative way to bend the curve in terms of macroeconomic and financial stability trade-offs.” What this gobbledegook means is that the Fed would simply create money and then distribute it to parties in danger of bankruptcy and foreclosure.
Isn’t that a great idea? Why stop with the bail-out of big banks when you can bail out anyone who gets in financial trouble? That would guarantee the zombification of the economy that is already well underway. Bad business ideas and badly managed companies would live forever at the expense of good ideas and well managed companies.
Click here to read the rest of the article at AgainstCronyCapitalism.org.
Hunter Lewis is co-founder of Againstcronycapitalism.org, co-founder and former CEO of Cambridge Associates, a global investment firm, and author of two recent books, Crony Capitalism in America 2008-2012 and Free Prices Now!, about the Fed.
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