Right here we’re once more.
Indexes are nonetheless hovering round their all-time highs and Fed Chairman Powell is talking to Congress. What’s he going to say? What can he presumably say to make you consider that the shares you might be massively over-paying for now are going to be much more massively over-paid for by the subsequent sucker down the street? How a lot cash will they need to pour into the system to keep up this farce? Will there ever be penalties or have been we simply fooling around for the previous 245 years having a finances?
Cash can simply be printed if you want it. It doesn’t matter what you wish to spend, you simply print extra and purchase no matter you want, proper? That is our present fiscal coverage and, as we famous yesterday, the Fed is chargeable for most of it and sure, we want the stimulus and we want the liquidity BUT THERE IS A COST – and we have not even been contemplating it.
Because the monetary disaster, the Fed has kept the cost of borrowing money for banks at near-zero percent interest. That allowed these banks to borrow cash to purchase their very own inventory (as did many companies) to inflate their worth however not, after all, the worth of their service to Primary Avenue. When cash is affordable as a result of rates of interest are low or close to zero, the beneficiaries are these with essentially the most direct entry to it. Which means, after all, that the most important banks, members of the Fed since its inception, get the biggest chunks of fabricated cash and pay the least quantity of curiosity for it.
Let’s recall that on September 15, 2008, Lehman Brothers crashed. That financial institution had been round for greater than 150 years. Its collapse was a key catalyst in a spiral of catastrophe that just about decimated the World monetary system. It wasn’t the chapter that did it, nonetheless, however the huge amount of cash the surviving banks had already lent Lehman to purchase the poisonous belongings that they had created. Within the wake of Lehman’s chapter, $16 trillion in bailouts and different subsidies from the Federal Reserve and Congress have been provided largely to Wall Avenue’s greatest banks. That circulation of cash allowed them to return from the sting of economic catastrophe.
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