An interesting point made in the full article deals with the lack in confidence in the Fed which prevents them from doing what they could to stimulate the economy. Which means we are screwed. Again.
For simplicity, let’s assume that the Fed’s policy instrument (now that the federal funds rate is stuck near zero) is the 10-year Treasury note. As an example, suppose the yield is 4%. In that case, it’s all but certain that the Fed, if it chooses, can do something to stimulate the economy and raise the inflation rate.
For example, suppose the Fed were to bid the 10-year note yield down from 4% to 1%. It would take out a whole slew of marginal noteholders in the process. Banks that had been satisfied with a 4% return would be unsatisfied with a 1% return and would lend more aggressively. Domestic investors that had been satisfied with a 4% return would be unsatisfied with 1% and would bite the bullet and buy stocks. International investors would be unsatisfied and would shift their investments into foreign assets, thus weakening the dollar and making US products more competitive. Households would refinance their mortgages and spend some portion of the increased cash flow. Others who previously couldn’t afford houses could now afford them, so demand for houses and home furnishings would go up. And so on. With such a huge policy action, it’s virtually certain that business activity would accelerate enough to reverse any deflationary pressure.
All money comes from the fed.
It only gets lent to some banks, not to people like us.
The fed can lower rates all it wants.
But the ONLY people who get the benefit are the banks who have access to the money that the fed hands out.
The banks are just going to get money that they borrow at one rate and use it to pay off money that they borrowed at the older higher rate.
They can even make a case that it only a proper risk reduction strategy.
Me and thee can just go suck eggs. The economy can just go suck eggs. The capital markets (like Wall street,) can just go suck eggs.
The banks won’t lend it out any more than they’re lending out money right now. (Too high a risk, don’ tcha ‘no?)
The only thing you can do with cash money is try to hang onto it; which is why we have companies reporting enormous, and growing. cash balances, cause they’re not lending it out either.
What’s the answer? Lear to live without credit!