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.
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