They have held themselves above capitalism’s consequences in a society which once prided itself on the concept of creative destruction. Remember when Japan refused to liquidate its bad debts after its real estate debacle in the 1980s? We mocked them and touted our own efficiency in punishing bad investments, liquidating debt and inventory, finding the clearing prices and pressing forward with new opportunity. To boot, we tried thousands of bankers for fraud.
Well, as time and consequences progressed, we have come to take a large page out of Japan’s book. In the years since 2008, the US Government – like Japan’s since the 1880s — has allowed the banks accounting flexibility to mask bad loans. The Fed has lent them money at rates they could not attract in the free market. It has bought their bad assets onto its own (our central bank’s!) balance sheet. It has bought hundreds of billions in government bonds to make interest rates appear low enough to encourage people into the stock market and revive the banks’ prospects.
To do this the Fed has printed trillions of the same money you store your savings in so it is worth less every day in terms of the things you need to survive. That bank account you have is paying, what, one-tenth of one percent? That’s the Fed’s super, bank-regenerating interest rate policy at work. Think of that deposit as a loan to your bank (which it is) that they get at “great low rate!” with which they can, what, reinvest in our economy? More likely your money will be speculating on Greek debt or oil futures.