Viva ZIRP!

Gualfin,  Argentina – Well, it’s ZIRP now. ZIRP forever.

Viva ZIRP! Viva! Viva!

As we suspected, Janet Yellen did not want to risk raising the federal funds rate. Bloomberg reports:

Federal Reserve officials left interest rates unchanged, opting to delay an increase amid stubbornly low inflation, an uncertain outlook for global growth and recent financial-market turmoil.

In holding their benchmark federal funds rate at zero to 0.25%, policy makers showed they are still not convinced inflation will move gradually back to their 2% target, despite continued gains in the labor market.

Punish the Savers!

The whole show is so preposterous that our head swims and our knees buckle.

The Fed is determined not to allow savers any compensation for their discipline and forbearance.

Either inflation erodes the buying power of their savings at a rate of at least 2% a year. Or the Fed deprives them of a decent return.

You just can’t make this stuff up. Presumably, the U.S. economy cannot function with stable prices. And the Fed seems to have a preternatural dislike for savers. They must be punished.

If inflation won’t do the job, we’ll do it ourselves, says the FOMC.

These policy decisions – and the folderol that comes with them – are so breathtakingly absurd there must be a deeper logic behind them.

And there is…

As we learned in yesterday’s Diary
, ultra-low interest rates are a form of white-collar crime. They steal money from savers and transfer it to debtors and speculators.

EZ money jacks up asset prices. C-suite bonuses rise along with them. Asset owners become richer… and can exchange their dollar profits for other people’s goods and services.

The house on Long Island that might have been owned by a plumber, who worked hard and saved his money, instead goes to a banker, who parlayed small interest rates into a big fortune.

The fix was in: The house was taken from the man who earned it and given to a man who connived with the fixers.