And I endorse George F. Will, who writes:
By breaking up the biggest banks, conservatives will not be putting asunder what the free market has joined together. Government nurtured these behemoths by weaving an improvident safety net and by practicing crony capitalism. Dismantling them would be a blow against government that has become too big not to fail. Aux barricades!
Jim P says: I heartily agree. See also from BBC http://www.bbc.co.uk/news/uk-politics-21315562 wherein Osborne says about British banks what no public official in the US will admit.
Clint says: Exploding the Too-Big-To-Fail Myth
MH - Secular Misanthropist says: The government is perfectly willing to break up technology companies (AT&T) or pursue antitrust cases (Microsoft). But the banks seem immune from control. This is particularly troubling given the risky nature of fractional reserve lending.
surly says: Hurrah for George Will! This could be a winning issue for Chris Christie to take on. He’s got the right tone of moral outrage and disgust to be credible.
I really hope he runs in 2016. He actually takes his oath to govern seriously. I may not agree with a lot of his positions, but I think he’d be a responsible president. And just like Nixon went to China and Clinton ended “welfare as we know it” it will take a Republican to break up the banks.
JonF says: I don’t agree that government created the big banks, except in the negative sense of not stopping the process of their consolidation. However that was a wholly natural market process, made possible by modern communications technology which allows a banker in Hong Kong to be as in touch with one in New York as with the guy in the next office next to his.
It’s also true that when small banks fail they are generally bought up by larger banks (for their assets and customer base) and this also facilitates the rise of big banks.
By the way the existence of a handful of big auto makers or IT firms dominating their markets doesn’t seem to imperil the economy. Why are big banks so unique in that respect?
Thomas Andrews says: In the dying embers of a fire kicked apart and ‘watered’ the cowboy way, every so often you find a bright ember, just waiting to kindle a flame to bring fresh light to the darkness of the conservative world in 2013.
Oh, and, he’s right about this. As so very often. About so many things.
Noah172 says: JonF wrote:
By the way the existence of a handful of big auto makers or IT firms dominating their markets doesn’t seem to imperil the economy. Why are big banks so unique in that respect?
See here: thecurrentmoment.files.wordpress.com/2011/07/mfg-and-fin-as-percentage-of-gdp-1947-20101.png
and here:
http://upload.wikimedia.org/wikipedia/commons/9/92/NYUGDPFinancialShare.jpg
One, finance is too large a share of our economy. The “FI” in FIRE has doubled as a share of the US economy since 1960, and is now nipping at the heels of manufacturing in that metric — that’s all manufacturing, not just autos or whatever (a sad commentary indeed). FI, even with the crash of 2008, has lost no ground as a share of GDP, and is still one-third above its previous historical peak right before the Great Depression (not a happy augury). The FIRE sector as a whole is now double all manufacturing as a share of GDP, versus just under three-fifths in 1960.
Two, we have to worry about consolidation in finance because productive firms large and small, as well as individual citizens (homebuyers most obviously), are dependent on credit. The ripple effects of the failure of a TBTF bank are much wider than if GM goes bust (as bad as that is undeniably).
Noah172 says: Where was George Will three years ago when Senator Brown’s bank-busting proposal — the Brown-Kaufman Amendment (http://en.wikipedia.org/wiki/Brown-Kaufman_amendment) — last came up for a vote? The bill was opposed by the Obama administration, neolib Democrats, and most Republicans (in thrall to Wall Street), but had the support of left-populist types (think Feingold) and three Republican Senators: the always quirky Coburn, senior R on the banking committee Shelby (no liberal he), and the now-resigned Ensign. The vote was 33-61.
Thomas Andrews says: JonF wrote:
By the way the existence of a handful of big auto makers or IT firms dominating their markets doesn’t seem to imperil the economy. Why are big banks so unique in that respect?
Well, Noah172 already gave an excellent answer to your question, so I’ll throw away most of what I was about to write.
Basically, the banking industry is granted immunity from the hard-knocks of real capitalist industries such as IT and the auto-makers. This is necessary because the original purpose of the banking industry in modern economies was to lubricate the flow of money and to be a buffer and shock-absorber to balance out the ups and downs inherent in capitalist economies.
Unfortunately, the banking industry has chosen to ignore the very duties they are charged with and for which they are given exceptions from the standards to which other large industry are held.
T Clark says: Isn’t this a liberal policy? How can taking control of an American business be considered decreasing the power of government? If this is conservative, what has been all the hoopla about TARP and the auto industry bailout? They represent just a difference in tactics, not in principle.
Noah, Will is an opportunistic hypocrite whose opinions change depending on whom he wants to ingratiate himself with, or on his attempts to appear relevant. I agree with him regarding the banks; but even a stopped clock is right twice a day!
Ampersand says: I’m all for this idea, and I’m extremely disappointed that the administration hasn’t at least tried it–Obama has mostly gone along to get along with the corporate crooks, but the crazies still think he’s a socialist. But even if he wanted to, he probably wouldn’t be able to pull it off (which may be why he hasn’t tried). This is a “Nixon to China” idea, the Republicans could get away with something that Obama never could. But any conservative that tried this idea would quickly find out who’s paying the bills in the Republican party.
Will in Mississippi says: There’s a lot to be said for the Ordoliberal policies Ludwig Erhard pursued in post-war West Germany that included anti-trust lawas borrowed from an American model. I don’t have the details at hand, but it would useful to explore how that might apply to banking. Such regulations would not be “anti-market” or socialist at all, but rather designed to work against corporatism and cartels that consolidated power in relatively few hands. The problem today with banking is not so much concentrating power as building a system with too much risk and too few barriers to its spread. Moving away, as suggested above, from having finance dominate the economy would be a very good thing.
steve in ohio says: T Clark–breaking up the big banks would not be a government take over. It would be similar to the government breaking up AT&T into the Baby Bells in the 1980′s. TARP gave money to the big banks, so the difference is a government policy that helped the monopolies survive versus one that destroys them.
Rand Paul, grab ahold of this issue and you will be the next President!
Scott Nunn says: From a consumer point of view, my wife and I are thrilled we left Wachovia (later bought by Wells Fargo) for a credit union. Fees are much, much lower and customer service and attitude both way better, I’m thinking this is what banking used to be like.
JonF says: Re: One, finance is too large a share of our economy.
Oh, I agree, but breaking up the banks won’t change that– in fact it could make it worse, since the result could be lots of duplicated overhead at the smaller banks.
If you’re worried about FIRE being too big, why not downsize the “I” component? Real national health insurance (at least by requiring all healthcare payers to be non-profits and function as public utilities) would eliminate a big chunk of that risk right there.
Thomas:
I’m not sure if we’d bail out Microsoft or HP– they’ve never been in a pinch where that question has come up. But we’ve bailed out Chrysler twice now, and GM as well. Basically, any industry whose collapse would produce lots of collateral damage will not be allowed to fail.
I’m almost coming to the belief that instead of TARP we ought have simply nationalized tottering banks (Citi, BofA…) in 2008-09 outright. Even for a reputed liberal like me, that’s a hard notion to accept because I don’t like to think of the government actually running institutions of that size, complexity and wealth: the possibilities for corruption and stupidity would be overwhelming. Though I do excuse TARP (yes, even Mr Bush’s role) since we were in unexplored territory and no one was quite sure what to do, rather like a patient in cardiac arrest being brought in the ER where no one is sure what the underlying problem is, but everyone knows something, must be done NOW– or else.
Mike MacLeod says: I can see my beloved George standing in his bowtie on the barricades, wagging an index finger at the banks, while the ovis poli in the background bellow and brandish pitchforks and torches.
The bankers, of course, writhe in agony like salted slugs at the loss of George’s good opinion. Nothing left but puddles of yellow slime.
Well, I can dream.
df says: My parents came from Cuba and Castro’s hell and worked really hard at manual jobs in the US to save for retirement.
It’s time to renew one of their certificates of deposit….interest rate for 3 years? .0040.
Can’t tell you how much I love TBTF world for bringing about an economy that does that! So, so special.
Ron says: For once I can agree with both Dreher and Will, even if the problem is not really that the banks are too big. The problem is that the parasites running the big banks know that their fellow parasites at the Fed, Treasury and Executive will bail them with out when they lose at the derivatives casino.
Thomas Andrews says: JonF,
We have a somewhat unusual situation right now in that the sane conservatives – Noonan and Will to name but two are completely locked out of the decision making in government by the those conservatives who are so totally enraged by being ruled by a Negro that nothing, absolutely nothing can be done in the foreseeable future.
This is why I so often say that governing conservatives are incapable of reflection or true moderation. It’s all their way or the highway on every single, solitary issue. I understand, of course, when someone like Rod gets horribly upset and insists that I not cast conservatives in with the Republicans, but, let’s be honest – conservatives are responsible for the mess the Republican party is in now and conservatives never, ever vote for the Democrats or Libertarians, they stay home first.
The banking system needs to return to the role foreseen by the country’s founders. Not happening until this generation of insane Republicans is drummed out of congress.
Oh,
I’m almost coming to the belief that instead of TARP we ought have simply nationalized tottering banks (Citi, BofA…) in 2008-09 outright.
Permanently or just temporarily in order to restructure them?
Geoff Guth says: I heartily endorse this as well. In my mind, this suggestion was one of the most attractive positions of Jon Huntsman’s quixotic bid for the nomination. Positions like this would go a long ways towards making me look again at the GOP.
I consider this important enough that (especially if coupled with a foreign policy that put Daniel Larison in as Secretary of State), I’d overlook the gay rights issues and vote Republican. That oughta tell you something.
This could be a winning issue for Chris Christie to take on. I really hope he runs in 2016.
=====================
I was surprised the Facebook guy found out Christie wasn’t for sale as I imagined he expected him to be. If Christie doesn’t sell out in the near future, that’s a good sign indeed.
spite says: Don’t break them up, just don’t bail them no matter how much “end of the world” screaming they do. Once their government money tree is cut off, the markets will very rapidly sort them out and bring them down to the correct size.
Ben, Okla. City says: Banks are like daylilies. Every few years you have to dig them up, split the roots, and replant in separate holes.
The mistake we made during the financial crisis was trying to save the banks, when we should have been trying to save the banking system. It’s hard to make the distinction in a crisis atmosphere, but there’s no reason we shouldn’t tackle this issue now that the crisis is over.
EliteCommInc. says: Well, I would be curious as to just how this plan will work.
Just how and who intends to inform Duetche Bank or Bank of America holders and perhaps owners with multiple finacial ties and holders such that no Bank is soley operated under laws of the US, that with the next 60 to ninety days they will no longer a single entity and their holdings which really aren’t theirs will cracked into five or six entities?
And as AT&T has done gradually of the last ten years or so start buying those entities which it used to own under the rules of the WTO.
After the savings and loan mess, the advent of mergers and supermergers, left banks in te drivers seat. The investment of these former US intitutions, I could be wrong, but this seems to require international approval —
This seems to be a winner. Nearly all commenters, presumably even the fabled horde from Daily Kos, whichever one’s those are, agree. Geoff G. would overlook a candidate’s positions on gay issues to get this right. All we need are some people in office who are listening.
This is the second time I’ve agree wholeheartedly with George Will. The first was when he asked “For a newlywed couple looking for their first home, do you think the current real estate market is a PROBLEM?”
Anything Brown, Feingold and Coburn can agree on is all right with me, especially if Geithner and Summers vehemently oppose it. Too bad they can’t get together on a party platform.
President Obama couldn’t be a socialist if he wanted to, because the chattering classes suspect him of being one, and advise him at length how to prove he’s not one, by bringing “responsible” people such as Geithner into his cabinet.
WorkingClass says: Ron Paul was my candidate in the last presidential election. My foreman supported Mitt Romney. But we agreed that Mitt would be the nominee and our occasional political conversations centered around Mitt vs Obama. Who would “win”? When the Republican House voted to audit the Fed and the only votes against were Democrats I told the boss that Mitt and his party were in big trouble.
The 47%, legitimate rape, self deportation, voter suppression – none of this was new. But it was magnified by the Corporate Media. The Party and the media together were able to crush Paul. But the party itself had attacked the Banking Cartel.
Wall Street banks are agents of the Fed (and the Treasury). To oppose the Fed is a ticket to the wilderness. Ask Ron Paul. If Republicans want to “break up” Wall Street they will have to embrace Populism and swear off Corporatism. They convincingly rejected that option in the primaries. It’s not gonna happen.
J says: The mistake we made during the financial crisis was trying to save the banks, when we should have been trying to save the banking system. It’s hard to make the distinction in a crisis atmosphere, but there’s no reason we shouldn’t tackle this issue now that the crisis is over.
That’s true. Wish it would happen. My best guess is that while most of the banks and companies were in awful holes, CitiBank was such a black hole that no one dared mention by name and most actions and policy post-AIG had to be constructed for.
Linda says: I found Will’s posting to be confusing and disjointed. He does not explain what breaking up the big banks would achieve. Wills said, “There is no convincing consensus about a correlation between a bank’s size and supposed efficiencies of scale, and any efficiencies must be weighed against management inefficiencies associated with complexity and opacity.” Wills does not explain what he means by, “Dismantling them would be a blow against government that has become too big not to fail.” Sounds like a typical conservative ideology that government is the problem/bad. Inadequate government from a bought Congress and some bought financial regulators is the problem.
I would not expect any laws for “too big to fail.” Many/most Republicans in the House continue with the ideology regulations=bad and want to overturn the already too weak Dodd-Frank. They have voted to reduce funding for the CFTC and SEC with the goal of reducing the ability to implement Dodd-Frank. Only four Republican Senators voted for Dodd-Frank: Grassley (R-IA), Brown (R-MA), Snowe (R-ME), Collins (R-ME) (Brown & Snowe gone). See eight major reform areas (Dodd-Frank) in the below GAO audit. While it is far from a perfect law and may need revisions, it provides many good reforms to reduce risk. The problem has been implementing caused by many things, especially objections from Wall Street.
The oversight complexity of the investment banks/bank holding companies has resulted in multiple federal and state financial regulators attempting to provide oversight or no federal financial regulator proving oversight. The lack of coordination or sharing of data has been covered in many General Accounting Office (GAO) audit reports. The GAO has written many good and very detailed audit reports on the financial crisis. GAO has repeatedly recommending the consolidation of the CFTC and SEC, which is even more important because Dodd-Frank assigned overlapping responsibilities that the CFTC and SEC have gone in different directions. Barney Frank submitted a bill for consolidation, but no action was taken on the bill. SEC requires an oversight fee, but CFTC does not. Because of the very long history of greed/fraud, Wall Street should pay a fee to cover the oversight – not taxpayers.
GAO: Financial Regulatory Reform, Regulators Have Faced Challenges Finalizing Key Reforms and Unaddressed Areas Pose Potential Risks, January 2013
“To examine regulators’ efforts to implement the provisions of the Dodd-Frank Act, we focused on eight major reform areas: capital requirements; resolution of financial institutions [FDIC has the authority to liquidate large financial firms, including nonbanks, outside of the bankruptcy process—called the Orderly Liquidation Authority (OLA)]; proprietary trading; derivatives; consumer protection; mortgage reforms; expanded regulation of institutions and products; and investor protection.”
“Overall, GAO identified 236 provisions of the act that require regulators to issue rulemakings across nine key areas. As of December 2012, regulators had issued final rules for about 48 percent of these provisions; however, in some cases the dates by which affected entities had to comply with the rules had yet to be reached. Of the remaining provisions, regulators had proposed rules for about 29 percent, and rulemakings had not occurred for about 23 percent.”
http://www.gao.gov/products/GAO-13-195
The link to in Will’s posting to The Atlantic, What’s Inside America’s Banks? is long, but very good.
The article covers issues that are more complicated than “too big to fail.” The investment banks/bank holding companies and AIG failed because of derivatives trading with insufficient margin/capitol to cover their losses. The risk still exists, “”The financial crisis had many causes—too much borrowing, foolish investments, misguided regulation—but at its core, the panic resulted from a lack of transparency. … At the end of the third quarter of 2012, JPMorgan had $72 trillion in notional [derivatives] amount on its books—about five times the size of the U.S. economy.” Investigations continuing on possible financial statement fraud.
Accounting – Financial Statements
“Many accounting experts believed that the reported numbers did not give investors an accurate or reliable picture of a bank’s health.” … ““There is no major financial institution today whose financial statements provide a meaningful clue” about its risks. Arthur Levitt, the former chairman of the SEC, lamented to us in November that none of the post-2008 remedies has “significantly diminished the likelihood of financial crises.””
AIG’s 2007 Annual Report filing was on the Internet in January 2008. The outside auditors gave AIG an “unqualified opinion” (bad, extremely rare) because they could not/would not provide details on their derivatives to determine the value or potential risk. Around the first of February 2008, a rating agency lowered AIG’s rating. The Federal Reserve did not acknowledge the risk until September 2008 blaming the problem in a regulator gap (as designed by law, no oversight of derivatives trading). AIG had a long history of fraudulent financial statements and other regulatory issues.
Many big companies build the slap on the wrist minor financial fees from the CFTC or SEC in to their budget as part of doing business. Congress should substantially increase the civil fine limits to an amount that might actually reduce the problems.
William Leach says: I agree with Spite.
Thats not to say I dont like the idea of breaking up the banks, but the problem to me is that we could set a dangerous precedent that could easily be misused in the future.
In addition to ending the defacto bailout guarentee, there are other things that can be done. State banks lile in South Dakota (am I remembering that right?) seemingly hold much promise, but are far less big government than nationalizing the financial sector.
Cutting down on regulation could allow for competetion, because most alternatives to the status quo arent allowed, except for credit unions, thankfully, and if they are they cant afford the cost of compliance. That said, we need to enforce big dumb rules rather than small complex ones, because there is wrong doing going on. Lets prosecute law breakers for once, going after criminals rather than relying on captive crony regulators. The only reason we aremt doing this is the same too big to fail thinking thats causing our problems. Maybe we can break up banks as criminal enteprises, but thats better than any other way of going about it. That and letting them fail.
Linda says: My above comment should have stated:
AIG’s 2007 Annual Report filing was on the Internet in January 2008. The outside auditors gave AIG an “qualified opinion” (bad, extremely rare) – not unqualified
JonF says: Re: Lets prosecute law breakers for once, going after criminals rather than relying on captive crony regulators.
The problem is, the stuff that was done in the mortgage boom (except the fraud committed at the bottom by borrowers and facilitated by their brokers when they lied about their income) was in fact almost entirely legal. Though a fair amount of it is actionable under civil tort law, and law suits are proceeding through the system– you read about a new settlement every other day. What we need are new laws– and yet look at how the GOP fought (and still fights) the rather thin gruel of Dodd Frank every step of the way.
JonF says: Re: Permanently or just temporarily in order to restructure them?
Not permanently. Temporarily for restructuring. Though that process could have taken years and created a huge opportunity for corruption. It’s not something I consider lightly.
But for sure there should have been a lot more strings attached to that TARP money.
JonF says: DF, no one has a right to a high rate of interest. This is one whine I am really sick of hearing. Yes, interest rates are rock bottom low. Tough luck, deal with it.
This is good news also because it means this is becoming respectable inside the beltway, for Will, though conservative, is never one to venture outside respectable beltway boundaries. Someone mentioned that this is good to see Will getting back to his paleocon roots. Agreed. But all it really means is a paleocon view of the world can once again be voiced inside the beltway, for Will would not be writing this if it was still akin to pooping in the punch bowl at the company Christmas party.
That this discussion is still necessary also reveals why Dodd-Frank was ultimately very poor legislation; it failed to get to the heart of the matter. So far, I think that is the legacy of Obama’s tenure: massive pieces of legislation large enough to make Tolstoy blush (Obamacare, Dodd-Frank), yet most notorious for failing to address the heart of the matter. A one-page piece of legislation that is very limited in scope but directed at the heart of the matter is nonetheless better than many thousand pages of legislation that avoid the heart of the matter and are obscure to even well informed citizens. To put it a different way, his presidency thus far has served to remind us that he is merely another in a long line of Ivy League, Beltway lawyers largely disconnected from the concerns of the average citizen.
M_Young says: “I don’t agree that government created the big banks, except in the negative sense of not stopping the process of their consolidation. ”
The government has created the entire modern financial ‘industry’. Without the government issuing paper (or electronic ‘units of account’), modern banking wouldn’t exist at all.
“DF, no one has a right to a high rate of interest. This is one whine I am really sick of hearing. Yes, interest rates are rock bottom low. Tough luck, deal with it.”
DF is absolutely right, my parents are in the same boat financially. The real rate of interest is actually negative. (BTW, has anyone noticed that food prices are going up pretty rapidly?) But aside from the harm that the Fed is doing to individuals by its loose money policy, it is also hurting the economy in the long run. Everyone is concerned about boomers and after not having saving enough money for retirement, but why would anyone save when they lose money doing so.
M_Young says: “The 47%, legitimate rape, self deportation, voter suppression”
Whatever you think about the other issues, anyone who goes by the moniker ‘workingclass’ should be all in favor of self-deportation. There is simply no doubt that mass immigration (legal and illegal) has hurt the finances of working class Americans.
The 47%, legitimate rape, self deportation, voter suppression – none of this was new.
I seriously doubt that the “self-deportation” statement hurt Romney in any significant way. He largely disavowed it because it offended his wealthy backers, like Sheldon Adelson, not because it was costing him votes. It’s only the pundit class who mocked the idea (without really explaining it). If he had bothered to explain what he meant, he would have put Obama on the defensive.
those conservatives who are so totally enraged by being ruled by a Negro
Oh, come on. The fact that Obama is black is not why conservatives don’t like him. To the extent that his race is a factor, it’s that he himself seems to use his race as a reason to cast himself as an outsider to America, who is more interested in remaking us to please the rest of the world rather than in protecting our national interests, and that his administration seems more interested in getting even with whites than in race-blind justice.
William Leach says: The justice department itself has said they have not prosecuted any banking higher ups because of economic reasons. Since when was fraud perfectly legal? But thats beside the point, my suggestion that we rely on big dumb laws still applies to the future, because the current regulatory regime guarentees that new or currently small banks, or any other financial instititions or actors, will never be able to compete with the too big to fail banks. Not only can the mega banks afford to comply with regulations, unlike any would be competitor, they can also afford to find ways around the rules. Even if a new Bank of Awesome could afford to follow all the rules, they would be unlikely to afford bending or breaking them like the big banks.
So far, I think that is the legacy of Obama’s tenure: massive pieces of legislation large enough to make Tolstoy blush (Obamacare, Dodd-Frank), yet most notorious for failing to address the heart of the matter. A one-page piece of legislation that is very limited in scope but directed at the heart of the matter is nonetheless better than many thousand pages of legislation that avoid the heart of the matter and are obscure to even well informed citizens.
Josh, as someone who voted for President Obama twice, and has no regrets, I believe you have offered the most cogent and accurate criticism of his presidency. In part, both monstrosities are camels — horses put together by committee — because he told congress to get him something he could sign, rather than getting into the ring and fighting for a one-page piece of legislation getting to the hear of the matter. His intentions were to get something that would pass by letting everyone get a piece of it — a contrast to Hillary Clinton bringing in a package that everyone would find something wrong with. But neither approach really got us where we need to be.
The fact that Obama is black is not why conservatives don’t like him.
I agree. Those in elective office who pass themselves off as “conservatives” these days, particularly the Republican variety, resent Barack Obama because they have suffered from a wounded sense of entitlement ever since Bill Clinton won an election in 1992. They thought 1980 heralded the dawn of a thousand year reich, or at least a conservative century, and darn if the voters every eight years or so don’t go electing one of the other guys. No fair!
Chris 1 says: The economy restructured in the 1980s/90s: risk devolved from corporations to individuals and corporations simultaneously were given greater flexibility and protections against risk.
A side-effect of this restructuring was that the “financial services sector” (includes banking and trading) bloated. As risk devolved to individuals more and more individuals invested in the market in a manner that is essentially unaccountable. Meanwhile the managers of great sums of individuals’ money were protected from loss and risk as their clients were not. The rules of fiduciary responsibility on that “big pool of money” were relaxed, even as the pool grew more and more lucrative.
The lesson of 2007/8 is that we need to remove the protections that the financial services industry has against loss, always at the expense of its customers, and once again that sector will shrink to its rightful place in GDP.
Had we tried that during 2007/8 we would have ground the modern economy to a dead stop, and today we’d be living in the world of Mad Max/Rod’s Apocalypse. Wiser men prevailed.
But the right thing to do in the short run is rarely the right thing to do in the long run, and today it’s time to spread the risk out and stop protecting Wall Street and banks from risk. The only way to spread the risk is to break up the banking behemoths, which a proper application of anti-Trust law would achieve.
Indeed, if we simply undid every law Phil Gramm managed to get passed for the banking industry we’d find ourselves on better footing going forward. Not to scapegoat Gramm, but to point out that we spent the late 80s and 90s setting this up, and the way out is to dismantle a structure that served mainly to make bankers and traders wealthy at the expense of every other sector of the economy.
Rich says: “DF, no one has a right to a high rate of interest. This is one whine I am really sick of hearing. Yes, interest rates are rock bottom low. Tough luck, deal with it.”
JonF – you are correct, IF those low interest rates are simply the result of market forces. However, the issue here is that the Fed has relentlessly pursued a policy of asset bubble re-inflation since the financial crisis and seems content to keep it that way. I think most people would agree that some easing in the immediate wake of the crisis was necessary and warranted. Now, years after the crisis has passed, the Fed is still pedal-to-the-metal and in the process, is punishing anyone who was prudent and saved for the future. Note that I said “saved” rather than “invested” since there are many folks out there (including many senior citizens) who cannot afford the risk of losing their principal and therefore can’t gamble in the markets.
If you got yourself deep in debt (housing or otherwise) or if you have the wealth required to play the markets, Ben Bernanke is your best friend. If you are like DF’s parents, hard-working folks who accumulated a little savings for their golden years, Bernanke’s policies are cruel indeed.
JonF says: Rich,
If you are a working person who wants to keep working then Bernanke is your friend also. Raising interest rates would crash the economy and throw a lot more people out of work.
We are already paying our taxes to keep the old folks going with Social Security and Medicare. Should we also have to sacrifice our jobs for their benefit? But then who will pay the taxes for their entitlements?
Interest rates were unnaturally high for a good while in the 80s and that got a lot of people thinking they could live off their savings (without spending down the principal) in retirement. Nope, that doesn’t work unless you are quite wealthy. Most of us aren’t.
JonF says: m_young,
Food prices fluctuate regularly, with the calendar. This is February: they are approaching the crest of their annual upswing.
I keep very good records of my spending going back a dozen years, with groceries (=human food only) as one of the categories. There was a lasting increase in food back in 2007-08, but since then my annual grocery expenditures have varied by just minor amounts. In fact my overall expenditures (less the purely discretionary items like charity, gifts and vacation travel) have not really gone up or down by much since moving to Baltimore almost five years ago (and all factors in my life have remained the same, unless the death of a cat last May counts as a big change). Inflation really is minimal right now.
A few weeks ago he wrote another column advocating this. I’m glad to see him getting back to his paleocon roots!