The Federal Reserve’s Zero Interest Rate experiment saved the banks and destroyed the retirement plans of many generations. Now they want to “normalize” things. Their solutions are ill timed and risky!
When things collapse, President Trump will become a combination of Herbert Hoover and Jimmy Carter – blamed for the catastrophe. Democrats will be cheering, “Pin the tale on the Elephant!” Republicans will be scattering like dandelion seeds in a tornado.
Follow the money
The Troubled Assets Relief Program (TARP) was sold as an emergency one-time bailout and interest rates would quickly return to normal. One-time and quickly didn’t happen. Instead, there was more bailout money (Quantitative Easing), the Fed bought approximately $4 trillion in US government securities and mortgage-backed debt, and interest rates have been at historic lows for over eight years.
Did the bailouts work?
The banks report profits and pay nice bonuses to their executives. Is the problem of banks being, “too big to fail” solved?
Politico reported, “Big Banks still too big to fail.”
“Regulators… flunked five of the country’s biggest banks on a key test of whether they are “too big to fail”…
… “The goal to end too big to fail and protect the American taxpayer by ending bailouts remains just that: only a goal”, (Emphasis mine) Thomas Hoenig, vice chairman of the FDIC, said in a statement.”
The New York Times reported, “Fed Policy Maker Urges Continued Work to End Too Big to Fail”.
“(T)he president of the Federal Reserve Bank of New York, William C. Dudley, said there had been much progress in making the financial system “less prone to panics.”
“Still,” he said in prepared remarks, there is more to do before we can say that we have ended ‘too big to fail.’ This is work that we absolutely must complete.”
Has the economy returned to normal?
The Fed raised rates .25% in December 2015. They held off additional increases until December 2016, after the election.
CNN Money reports:
“Federal Reserve Chair Janet Yellen gave the U.S. economy a nearly clean bill of health, two days before Donald Trump arrives at the White House. (Emphasis mine).
Now, it’s fair to say, the economy is near maximum employment and inflation is moving toward our goal.”
The Minutes of the Federal Open Market Committee meeting in March 2017 adds:
“Nearly all participants judged that the U.S. economy was operating at or near maximum employment.
… Job gains had remained solid, and the unemployment rate had changed little in recent months.”
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