In the 21st century Americans
have been distracted by the hyper-expensive “war on terror.” Trillions of
dollars have been added to the taxpayers’ burden and many billions of dollars
in profits to the military/security complex in order to combat
insignificant foreign “threats,” such as the Taliban, that remain
undefeated after 15 years. All this time the financial system, working
hand-in-hand with policymakers, has done more damage to Americans than
terrorists could possibly inflict.
The purpose of the Federal
Reserve and US Treasury’s policy of zero interest rates is to support the
prices of the over-leveraged and fraudulent financial instruments that
unregulated financial systems always create. If inflation was properly
measured, these zero rates would be negative rates, which means not only that
retirees have no income from their retirement savings but also that saving is a
losing proposition. Instead of earning interest on your savings, you pay
interest that shrinks the real value of your saving.
Central banks, neoliberal
economists, and the presstitute financial media advocate negative interest
rates in order to force people to spend instead of save. The notion is
that the economy’s poor economic performance is not due to the failure of
economic policy but to people hoarding their money. The Federal Reserve and its
coterie of economists and presstitutes maintain the fiction of too much savings
despite the publication of the Federal Reserve’s own
report that 52% of Americans cannot raise $400 without selling personal
possessions or borrowing the money.
Negative interest rates, which
have been introduced in some countries such as Switzerland and threatened in
other countries, have caused people to avoid the tax on bank deposits by withdrawing
their savings from banks in large denomination bills. In Switzerland, for
example, demand for the 1,000 franc bill (about $1,000) has increased
sharply. These large denomination bills now account for 60% of the Swiss
currency in circulation.
The response of depositors to
negative interest rates has resulted in neoliberal economists, such as Larry
Summers, calling for the elimination of large denomination bank notes in order
to make it difficult for people to keep their cash balances outside of banks.
Other neoliberal economists,
such as Kenneth Rogoff want to eliminate cash altogether and have only
electronic money. Electronic money cannot be removed from bank deposits
except by spending it. With electronic money as the only money, financial institutions
can use negative interest rates in order to steal the savings of their
depositors.
People would attempt to resort
to gold, silver, and forms of private money, but other methods of payment and
saving would be banned, and government would conduct sting operations in order
to suppress evasions of electronic money with stiff penalties.
What this picture shows is
that government, economists, and presstitutes are allied against citizens
achieving any financial independence from personal saving. Policymakers
have a crackpot economic policy and those with control over your life value
their scheme more than they value your welfare.
This is the fate of people in
the so-called democracies. Any remaining control that they have over
their lives is being taken away. Governments serve a few powerful interest
groups whose agendas result in the destruction of the host economies. The
offshoring of middle class jobs transfers income and wealth from the middle
class to the executives and owners of the corporation, but it also kills the
domestic consumer market for the offshored goods and services.
As Michael
Hudson writes, it
kills the host. The financialization of the economy also kills the
host and the owners of corporations as well. When corporate executives
borrow from banks in order to boost share prices and their performance bonuses
by buying back the publicly held stock of the corporations, future profits are
converted into interest payments to banks. The future income streams of
the corporations are financialized. If the future income streams fail,
the companies can be foreclosed, like homeowners, and the banks become the
owners of the corporations.
Between the offshoring of jobs
and the conversion of more and more income streams into payments to
banks, less and less is available to be spent on goods and services.
Thus, the economy fails to grow and falls into long-term decline. Today
many Americans can only pay the minimum payment on their credit card
balance. The result is massive growth in a balance that
can never be paid off.
It is these people who are the least able to service debt who are hit with
draconian charges. The way the credit card companies have it now, if you
make one late payment or your payment is returned by your bank, you are hit for
the next six months with a Penalty Annual Percentage Rate of 29.49%.
In Europe entire countries are
being foreclosed. Greece and Portugal have been forced into liquidation
of national assets and the social security systems.
So many women have
been forced into poverty and prostitution that the hourly price of a prostitute
has been driven down to $4.12.
Throughout the Western world
the financial system has become an exploiter of the people and a deadweight
loss on economies. There are only two possible solutions. One is to break
the large banks up into smaller and local entities such as existed prior to the
concentration that deregulation fostered. The other is to nationalize
them and operate them solely in the interest of the general welfare of the
population.
The banks are too powerful
currently for either solution to occur. But the greed, fraud, and
self-serving behavior of Western financial systems, aided and abetted by
governments, could be leading to such a breakdown of economic life that the
idea of a private financial system will become as abhorent in the future as
Nazism is today.
Paul Craig Roberts is a
former Assistant Secretary of the US Treasury and Associate Editor of the Wall
Street Journal. Roberts’ How
the Economy Was Lost is now available from CounterPunch in electronic
format. His latest book is The
Neoconservative Threat to World Order.
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