To: tejek who wrote (102680 ) 10/5/2011 8:23:13 AM From: RetiredNow Read Replies (1) | Respond to Bullshit. What do you think zero percent interest rates are? That is a direct transfer of wealth from you and I to the banks. It is an ongoing ginormous bailout. This is how it works. The Fed loans money to the banks at 0%. The banks buy Treasuries earning 1-3% interest and pocket the spread between that and the 0% cost of the Fed loan. Then they pay themselves hundreds of millions in bonuses. Where do you think those profits and bonuses come from? It comes directly from you and I. The majority of investors like retired people and those terrified of the casino that the stock market has become, who are buying Treasuries right now, are not getting market rates for loaning their money. They are getting artificially suppressed rates. If the free market was allowed to function, US rates would be far higher at our level of Debt to GDP. This is what Quantitative Easing (aka money printing to buy Treasuries and MBS, CDOs, CMOs) does. It suppresses interest rates by the Fed introducing massive Fed demand for bonds, which takes away the free market power of the bond vigilantes. You see. the bond vigilantes would SELL Treasuries and increase the spread (market interest rate) on sovereign debt for dodgy countries like the US and Greece. But the Fed has stepped in to provide artificial demand through QE and ZIRP, effectively trouncing the free market and reversing the decline in Treasuries. In return the banks get recapitalized in exchange for stealing money from savers and investors and in exchange for driving up prices of everything due to the destruction of the value of the dollar.
