Five years of the Fed and Treasury Department’s forced Zero Interest Rate Policy (ZIRP) have badly distorted our economy, removing any pretense of a “free market.” All that we have left are markets on life support. With yields of less than 1/4 of 1%, passbook savings accounts are joke. Money market rates ranging from 0.40% to 0.85% aren’t much better. With ZIRP, local, state, and Federal government over-spending has had no serious consequences. But when rates eventually do spike, there will be a bloodbath. Bond yields are completely out of whack. Banks have been given unrealistically high reserves. So ZIRP is also a bailout in disguise that is keeping insolvent banks floating, long after they should have failed. Worst of all, ZIRP has created negative rates of return, after adjusting for inflation. This discourages genuine savings and investing. Out of desperation, savers and investors now plunge their money into the stock market, hedge funds, mutual funds, junk bonds, and derivatives, which have become enormous casinos with wild price gyrations. This enormous malinvestment now threatens an era of market manias, panics and crashes. With a stagnant economy, there is no end in sight for ZIRP. It will likely continue to 2014 and beyond. In the long run we will all suffer for it. So we must ask: Cui bono? It clearly isn’t you and me that benefits. It is the government and the banksters.
UPS Shares Slide on Dimmed Forecast. Note that this is a key sign of a declining economy.
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