Member since: Thu Oct 5, 2006, 02:23 PM
Number of posts: 2,506
Number of posts: 2,506
There is the interest paid to savers, that is, interest paid to depositors who put money into interest bearing accounts.
The bank pays depositors for the use of the depositors' money, which is then used to lend to borrowers.
On the other hand, there is the interest charged by the bank to borrowers. The banks don't lend "their own money" to borrowers, but in fact are lending depositors' money to borrowers. The diffence between what the bank pays to depositors for the use of the depositors' money, and what the bank charges borrowers that they lend it to is essentially a fee to borrowers and provides the bank with its profits.
The Federal Reserve sets both types of interest rates through a jumble of arcane monetary manipulations. Currently, the interest rates on deposits is around 0.1 percent (or .001), while interest on credit card balances is around 14 percent. This constitutes a "spread" of 14 percent / 0.1 percent = .14 / .001 = 140 times. Not too many years ago, bank savings deposits were paid 2 or 3 percent interest for a spread of, for example, .14 / .02 = 7 times.
In effect, these days, if middle class credit card users aren't paying off their credit card balances quickly, they are paying the banks usurious rates to borrow their own money.
The interest rates that the Fed traditionally raised were the rates charged to borrowers. They used to allow interest rates paid on deposits to rise as an excuse for raising the rates on borrowers, but recent history has shown that there is no penalty for cheating depositors.
The real reason for the Fed raising interest rates on borrowers was to strangle the economy when it approached full, or near full, employment. Full employment means that employers have to offer higher wages and better working conditions to attract a smaller pool of unemployed people.
With governments promoting higher minimum wages, and a smaller pool of desperate job seekers, the plutocrats are looking to the Fed to perform its traditional role of strangling the economy.
To improve the economy, two interest rates should be adjusted. Interest paid to depositors (savers) should be raised so at least to approximate inflation, and interest charged on credit card balances and student loans should be lowered so that the middle class can afford to spend more on goods and services, thereby contributing to the economy, rather than just providing the banks with huge profits.
Professor Wolff is referring to the interest rates charged to borrowers. My comments referred to both sets of interest rates. However, I didn't explain with enough detail. I hope this post helps.
Posted by AdHocSolver | Mon Mar 9, 2015, 11:56 PM (1 replies)
The low interest rates on bank deposits is depleting the assets of middle class savers due to the relatively high, but purposely hidden, inflation rate.
Meanwhile, the high interest rates charged to middle class borrowers, especially the 14 percent and more charged on credit card balances, is destroying the purchasing power of the same middle class.
To help the middle class and boost the economy, what the Fed should be doing is raising the interest rates paid to depositors and substantially reducing the rates charged on credit card balances and student loans, so that the middle class can have more money to spend on goods and services and can afford more education. This is basic economics logic.
The Fed's policy is taking money away from the middle class and giving it to the banks. This does not help the middle class or the economy.
The Federal Reserve is NOT an unbiased third party working for the benefit of the country. It is owned by the banks and works entirely for the benefit of the banks. and Wall Street
Posted by AdHocSolver | Mon Mar 9, 2015, 11:53 AM (1 replies)
However, you won't understand economics from listening to 95 percent of professional economists, nor will you learn how the middle class is purposely being destroyed by the wealthy class (the 1 percent).
The economic "measures", the charts and graphs, the meaningless terms and definitions, such as "free trade", and "free markets", and "global economy," are all designed, not to instruct and inform, but to confuse the masses and obscure the issues.
The U.S. is no longer a capitalist democracy, but a plutocracy with a centrally planned economy (by an oligarchy), where "competition", a key operating factor in a viable capitalist system, is quickly becoming irrelevant and nonexistent.
The first factor to understand is that merely increasing their wealth by stealing the assets of the middle class is not the primary goal of the wealthy. It is a means to an end, the goal being to crush and eliminate the middle class as an alternative center of power to the plutocracy. This is why the right wing is attacking the unions so vociferously.
The key to creating wealth is in manufacturing. The key to controlling wealth is in the control of trade.
The U.S. economy will NOT recover until a majority of the goods that Americans buy are made in the U.S. by American labor. Period!
This will only happen when Americans demand that American made goods are offered for sale in large quantities at competitive prices, and refuse to buy imported goods at artificially inflated prices.
Moreover, the stock market only measures how well the plutocracy is succeeding. It does not measure the well-being of the economy or the middle class. (The stock market as a measure of the economy only has meaning if you accept "trickle-down economics" as valid -- which it is NOT.)
The public welfare also must account for inflation of which there has been a significant amount. Prices of necessities, such as food, have increased significantly in the past 10 years. For example, tomatoes, which used to be priced at around 49 cents a pound, now cost about $2.00 a pound, and they are imported from Mexico.
Posted by AdHocSolver | Mon Mar 9, 2015, 01:55 AM (1 replies)
...and against Main Street.
I have a degree in Economics, not Banking, although I worked for a bank several years ago.
I find it upsetting that basic economic issues, which can be explained in terms that almost anyone can understand, are almost universally obscured by those who even bother to comment on economic issues.
Just like the tables, charts, and graphs that people post here on the stock market, deficits, employment and unemployment figures, GDP, and interest rates do NOT explain the economic reality of why the wealthy are getting wealthier at the expense of everyone else, the charts, graphs, and tables, besides being irrelevant, totally obscure the economic mechanisms at work and give one a headache.
The links you provided to the Fed, WSJ, and Bloomberg are not going to provide anyone information about how Wall Street is stealing from Main Street.
Moreover, Wall Street and the banks know damn well how they are destroying the middle class.
Posted by AdHocSolver | Sun Mar 1, 2015, 04:02 PM (0 replies)
Borrowers in China are charged only 5.35 percent for the a one year loan while depositors receive 2.50 percent interest on their one year deposits.
This amounts to a "spread" between what the bank charges borrowers and what it pays depositors of .0535/.0250 = 2.14.
In the U.S., banks pay depositors about 0.10 interest on comparable deposits, while charging 14 percent or more on credit card balances. This amounts to a spread of 0.14/0.001 = 140.
Since the group of people who have savings deposits are largely the same people who borrow money to make purchases, what the Chinese are doing is essentially to increase the money supply to consumers to increase their economy, that is, increase spending.
Therefore, China is taking appropriate action to spur their economy.
U.S. policy, as practiced by the Federal Reserve (a wholly owned subsidiary of wall Street), is to pay practically nothing to depositors for the banks' use of depositors' assets, while charging usurious rates to short term borrowers who use their credit cards and aren't able to pay off their balances within the grace period.
The end result is that the banks siphon spending money away from consumers who would have more money to spend on goods and services if they weren't paying so much on bank interest.
It gets worse. Austerity measures promoted by the banks and Wall Street further siphons money away from governments which could increase economic activity by spending money on infrastructure and education.
Allowing offshore tax havens and reducing taxes on the rich removes money from the middle and working classes since governments either have to reduce spending or borrow the money from the wealthy (those who have it to lend) to pay the wealthy for the funds that they would normally get merely by taxing the rich.
To summarize, China is taking appropriate action to help their economy, by providing low cost funding to their people to increase spending.
U.S. policy, dictated by Wall Street and the large banks, and carried out by the Fed and right-wing conservatives in government, is designed to stall the U.S. economy by taking money away from those who would spend it productively.
This is the reality of the U.S. economy and of the so-called "global" economy.
This is the "big picture". The little ups and downs in the stock market and the unemployment rate, and the phony low-balled inflation rate, are irrelevant to what is being done to the world's economies. Even raising the minimum wage, while it is long overdo, and will help individuals affected by it, won't prevent a global economic collapse which is the GOAL of the oligarchy. Then they will OWN everything.
Posted by AdHocSolver | Sat Feb 28, 2015, 11:19 PM (1 replies)
However, I have to respond with a dose of reality to the last paragraph in your post.
"Well, sure, that's one of my motives. The American left has magical thinking about manufacturing employment that is counterproductive, so I argue against it. Manufacturing is no different from agriculture, extraction, or services: all of them add value, and we need to pay the people who do all of them more than we do now."
The principal source of gaining wealth is through trade. The principal method for spreading the wealth for a large number of people in a given population is by manufacturing goods and trading those goods with other groups.
Japan is an example of a country with limited resources. It developed into a wealthy country by manufacturing and trading goods with other countries. The wealth is widely distributed among the population.
Saudi Arabia is a wealthy country whose economy is based predominantly on the extraction of oil. The wealth is concentrated largely in the hands of a "royal" family and their followers. The rest of the population, not so much.
China is another example of a country that is expanding its wealth through manufacturing. It has a large population, and the wealth is spreading throughout the population, as can be seen through the fact of its growing middle class.
In fact, the corporations are looking at China, with its growing middle class, as an area of expanding markets.
One of the aims of the TPP is to prevent any competitors from entering the U.S. markets and taking market share away from the corporations that currently control it.
The TPP is NOT a "free trade" agreement. On the contrary, it is a treaty to prevent competition
Posted by AdHocSolver | Wed Jan 28, 2015, 02:16 PM (0 replies)
Most of the everyday goods purchased by Americans are manufactured in whole or in part in low wage countries including, but not limited to, clothing, shoes, electronics, (computers, calculators, TVs, telephones, and more) electrical goods, appliances, hardware, tools, furniture, auto parts, pens, pencils, books, and more.
Actually, the sheer quantity of goods that are imported, goods which used to be manufactured in the U.S., belies your contention that "we manufacture more today than at any point in US history."
The huge trade deficit that the U.S. has with China, and the hoarding of profits by the corporations in overseas tax havens, is going to collapse the U.S. economy.
The TPP will only hasten that collapse.
Posted by AdHocSolver | Wed Jan 28, 2015, 01:59 AM (1 replies)
This will result in a larger U.S. trade deficit and require more borrowing from China to be able to buy (on credit) from them.
Moreover, the problems with the safety and quality of imported medicine is NOT that China or India cannot make quality products.
The problem is that the corporations that import the stuff into the U.S.make little or no effort to demand quality and safety of the products from their foreign suppliers.
Outsourcing jobs is used to place the manufacturing of products beyond the reach of U.S. safety and quality regulations.
From what is known about the TPP, in effect, it allows corporations to sue the U.S. government if the government takes action to protect the American people by banning defective products if such a ban interferes with the profits of the offending corporation.
It seems, from your comments, that you have no concern about these issues.
Posted by AdHocSolver | Wed Jan 28, 2015, 01:12 AM (1 replies)
The barbarians have taken over the U.S., and a majority of the voting public are too muddleheaded to deal with it.
K and R.
PS: If the TPP is not defeated, that deep hole you spoke of is going to go all the way to China.
PPS: Thank you for speaking up for the American people.
Posted by AdHocSolver | Tue Jan 13, 2015, 12:29 AM (0 replies)
We have numerous examples of corporate control everyday on DU and in other media.
Besides the media, the corporations control numerous key politicians, trade, technology, many parts of the judiciary, our elections through the use of secretive, propriety voting systems and machines, our food supply (GMO foods), medicine (pharmaceuticals and much of health insurance), transportation, the military, and it seems that everyday, they are gaining more control over education (private charter schools and mind-numbing practices like "teach-to-the-test" techniques such as "No Child Left Behind" and "Race To The Top").
It seems that the main hope, perhaps the only hope, of reversing the complete takeover of civilization by the corporate 1 percent, is for a large part of the 99 percent that currently supports them comes to realize that their time will come to be oppressed when they cease to be useful minions of the oligarchy.
The goal should be for the middle class and the working class to regain a practical amount of negotiating power vis-a-vis the oligarchy. This negotiating power was previously provided by a strong union movement that supported the election of politicians who supported the interests of the people.
There are two main tactics used by the corporatists to achieve their aims of total control.
One tactic is to debilitate the union movement. This takes bargaining power away from the people.
The second tactic is to computerize every activity of the people. This removes all decision-making power from workers and lower level managers, since how the computers are programmed is controlled by upper management. That is, if an action isn't allowed by the computer, the user of that computer cannot make a decision of what is to be done.
Moreover, the computer allows tracking and recording of every action by a user of that computer. There is no privacy, and what is tracked is controlled by the "boss".
There are two ways to slow the march to a feudal system.
One strategy is to support workers and demand more American-made products.
The second strategy is to stop embracing the computerization of everything. It takes decision making ability away from people and hands more power to the corporations that decide how the computers are programmed.
Posted by AdHocSolver | Sat Jan 3, 2015, 07:23 PM (0 replies)