General Discussion
In reply to the discussion: Paul Krugman Tells GOP Senator: ‘Your Facts Are False’ On Social Security [View all]AdHocSolver
(2,561 posts)The Fed's keeping interest rates artificially low is one method used to enable speculation by the one percent. Moreover, low interest rates on bank deposits encourages the still affluent middle class to use some of their savings to speculate in the stock market, even as the economy (and consumer demand) falters. This speculation drives the stock prices up until demand drops and ends the "bull" market.
Low interest rates promoted the housing bubble by encouraging buyers to borrow more than they could actually afford.
There is a direct transfer of wealth from the middle class to the one percent due to low interest rates. A bank that pays 0.1 percent (0.001) interest on deposits while charging 7-, 10-, or 15-percent interest on loans (for example, credit card balances) is receiving 70, 100, or 150 times what it pays for the use of that money.
Moreover, low interest rates hide the actual inflation rate which is considerably higher than the one stated by the government figures.
The economic conditions today are similar to those that existed in the late 1920's and early 1930's that led to the Great Depression.
The bankers then, as the bankers today, preached austerity, which led to high unemployment and, in Germany, rampant inflation. The bankers seem to be looking for a replay of Germany in the 1930's.