Now that the rate has fallen to zero, you'd think the Fed had done about all it could on behalf of the oligarchs pulling all the strings. But no, they've found another way to keep all their magical balls in the air: pour more money into the system, billions, trillions, a ploy that has the same effect as lowering interest rates. How? Ask the economists, I don't have a clue. All I know is that the little guy keeps getting shafted, all in the name of saving our wonderful "financial system" -- at ALL cost.
Raising interest rates would have cut us a break, would have given us an incentive to do the truly smart thing and put our money somewhere safe, where the slick operators couldn't get at it. But no. The prime rate is down all the way to zero. Putting your money in the bank will earn you a piddling 1 or maybe 2 percent. So don't even think about pulling whatever you might have left in that 401 k out and putting it where it might be safe, in an FDIC insured savings account. It's just not worth it.
And the trillions now being poured into the system are having yet another devastating affect on us ordinary citizens, though it isn't apparent yet. Once again the powers that be are Hell bent on saving us from ourselves. Because if anything is worse to them than allowing us to earn some meaningful interest on our savings, it's allowing us to benefit from the one piece of good news coming out of the meltdown: lower prices -- aka "deflation." The sweaty hands of the oligarchs and their minions are already wringing over that possibility, which, of course, must be countered, at all costs, and with drastic measures.
It's already happening in Spain. And, of course, the hand wringing has begun. Dig this headline, from the NY Times: As Prices Fall, the Specter of Deflation Rises Over Spain. Here's the scoop:
Faced with plunging orders, merchants across this recession-wracked country are starting to do something that many of them have never done: cut retail prices. . .Excuse me, but with unemployment rising sharply and consumers cutting spending, doesn't it make sense to lower prices? Isn't that a natural response to the economic reality? And won't lower prices make it easier for laid off workers and retirees who've lost most of their savings to survive? Sure, lower prices will also mean lower wages, but I've got news for you: wages are already near rock bottom. And jobs are already nonexistent. I'm not an economist, but I do have some scientific training, and there is one thing I know very well: a correlation does NOT necessarily imply a cause and effect relationship. Sure, prices went down during the depression, but that is NOT what caused it. The last depression was caused by the same greed, manipulation, deception and dishonesty that caused this one. If anything made the last depression tolerable and, no doubt, saved millions from the streets or worse, it was deflation, i.e. lower prices. And if there is anything that could make our present situation truly impossible, for everyone concerned (aside from the bankers and their sycophants), it would be what the geniuses in Washington seem bound and determined to produce: inflation, aka higher prices. Possibly much higher. Possibly sky high. For the good of the "system," natch.
With the toxic combination of rising unemployment and falling prices, economists fear Spain may be in the early grips of deflation, a hallmark of both the Great Depression and Japan’s lost decade of the 1990s, and a major concern since the financial crisis went global last year.Deflation can result in a downward spiral that can be difficult to reverse. As unemployment rises sharply and consumers cut spending, companies cut prices. But if sales do not pick up, then revenue can decline further, forcing more cuts in workers or wages. . .
The American economy is less vulnerable to deflation, in part because of the Federal Reserve’s decision to cut interest rates to near zero and increase lending by $2 trillion. The European Central Bank has also cut rates, though more slowly, and it has resisted the lending measures adopted by the Fed and the Bank of England to prop up spending.
But just think about what inflation would do to the unemployed; the underemployed; all those whose 401 k's and other investments have been decimated; not to mention the out and out poor, who depend on handouts to survive. Lose your job, lose your shirt in the market, lose your home -- and go to the supermarket only to find that food prices have doubled, tripled, quadrupeled -- or worse. This is what Geithner, Bernanke and company would like to see, and what they are now striving for. To save the system. Natch!
Cut us a break, folks. Let deflation take its course. Give us an honest shot at survival, OK? Coming out of the supermarket with a receipt for $30 instead of $75 sounds awfully good to me. Pruning that monthly gas and electric bill down to size would also do nicely, thank you. And $2.00 a gallon for gas, instead of $4.00, makes a lot of sense to me. I like that feeling. So if prices want to fall, why not just let them.
I'll say it one more time, with feeling: cut us a break!!!!