Wall Street Breakfast: Must-Know News [View article]
But the problem of corporate insiders looting their shareholders is also the result of artificially low rates.
By keeping rates low, people are forced into equities and stock mutual funds to avoid negative returns on their saved cash. This emboldens corrupt corporate management to loot their shareholders because (a) most shareholders have been herded into mutual funds and don't even know which companies they own, let alone vote as shareholders; and (b) there is no alternative savings vehicle without negative real returns.
If you look back in time, you will find that the era of looting by corporate executives started with the Greenspan stock bubble era of artificially low rates. Before the mid-90's managements' compensation was more on the order of 30-50 times the average worker, and with the growth of the bubble it became 150-200 times.
Wall Street Breakfast: Must-Know News [View article]
..... Thomas Hoenig said the central bank should start to raise the fed funds rate “sometime soon” to about 1% to prevent asset bubbles from emerging. ....
Does anyone really think that there is any difference between 0.25% and 1%, whether to prevent bubbles, encourage savings, or ensure that capital is borrowed for a useful purpose ?
The entire capitalist paradigm has been killed by artificially low interest rates for too long. Instead of successful entrepreneurs creating capital by accumulating their savings (the original notion of capital is saved labor), we get capital that is just printed at the whims of bank clerks. So, instead of having successful entrepreneurs be the stewards of creating and allocating society's capital resources, we have ignorant people creating money at will. The result is that society's resources are misallocated, wasted for unproductive activities, and loaned out to those who dissipate them and never pay them back.
Wall Street Breakfast: Must-Know News [View article]
By keeping rates low, people are forced into equities and stock mutual funds to avoid negative returns on their saved cash. This emboldens corrupt corporate management to loot their shareholders because (a) most shareholders have been herded into mutual funds and don't even know which companies they own, let alone vote as shareholders; and (b) there is no alternative savings vehicle without negative real returns.
If you look back in time, you will find that the era of looting by corporate executives started with the Greenspan stock bubble era of artificially low rates. Before the mid-90's managements' compensation was more on the order of 30-50 times the average worker, and with the growth of the bubble it became 150-200 times.
Wall Street Breakfast: Must-Know News [View article]
Does anyone really think that there is any difference between 0.25% and 1%, whether to prevent bubbles, encourage savings, or ensure that capital is borrowed for a useful purpose ?
The entire capitalist paradigm has been killed by artificially low interest rates for too long. Instead of successful entrepreneurs creating capital by accumulating their savings (the original notion of capital is saved labor), we get capital that is just printed at the whims of bank clerks. So, instead of having successful entrepreneurs be the stewards of creating and allocating society's capital resources, we have ignorant people creating money at will. The result is that society's resources are misallocated, wasted for unproductive activities, and loaned out to those who dissipate them and never pay them back.