That's what I said
Let the rap a plan
Said he'd see him home
But his hope was a rope
And he should've known
- Freddie's Dead (Curtis Mayfield -1972)
Substitute Fed for Fred and you see what I mean. You have to love the line "but his hope is a rope" because that is what the Fed is pushing. How much more money can Mr. Bernanke drop from his helicopter? How much lower can he push long-term rates? And when will he wake up to realize it does nothing but line the pockets of the bankers.
First, let me back up a bit. I am not anti-bank. In fact, I applaud them for making as much money as they can in the environment they are given. What would you do if given a choice of a steady income at no risk or a bit more income at high risk? You would take (borrow) the free Fed money and invest in risk-free Treasury bonds and collect the spread.
After all, that is what banks are supposed to do - collect the spread. They borrow from depositors at a low interest rate and loan it to businesses and homeowners at a higher interest rate.
Must I go back to my analogy of lions and zebras? The Fed dumped a zebra on a pride of lions and expected the lions to give it to the hyenas. Then they complain that the lions ate the whole zebra themselves.
Hey Fed, stop giving zebras to lions. Stop the stupid low interest rates and twisting and monetizing of the debt. Banks are not going to loan to businesses when they can get risk free profits on the backs of the taxpayer.
Hey kids, occupy the Fed! Banks are just the face of what is wrong, not the reason it is wrong.
As I said yesterday, let rates go back up so banks have to work for a living. I bet they'll also tone down the stupid derivatives bets, too.
The Fed is dead. They have lost their ability to do anything worthwhile. Maybe it is time to stop this madness, and I mean that word sincerely.
Thursday, June 21, 2012