Tuesday, November 26, 2013

Are Banks Picking the Pockets of the 99 percent?

Two blogs ago, I noted the Financial Times article warning that banks may soon begin charging customers for bank deposits. The reason for this was yet another Fed yen to "juice" the economy, this time by cutting interest on the banks' money reserves. For example, if the Fed were to cut the bank interest 0.25% then account holders would see perhaps $25 paid in new "deposit" fees to offset the costs to the banks.

Now, according to Project Censored, one of the top ten untold (by the corporate media) stories ("Bank interest inflates global prices by 35-40 Percent")  is that banks are picking the pockets of most us by way of interest.  The story cites Prof. Margrit Kennedy whose research has shown that 35 percent of the cost of everything bought in the U.S. goes to interest. In other worlds, if consumers spend $400 m on Xmas gifts this year, up to $140 million will be burned up in interest payments.

In her 2012 book, 'Occupy Money', Kennedy, of Germany's University of Hanover, asserted this provides a major vehicle for funneling money from the 99% to the one percent. She wrote that tradespeople, suppliers, wholesalers and retailers along the chain also rely on credit.

Though her figures were initially drawn from the German economy, Ellen Brown -  of  'The Web of Debt' and Global Research found similar patterns in the U.S.  Kennedy has argued that this "hidden interest" has sapped the growth of multiple industries  while lining the pockets of the financial sector.  The effect is that the bleed off of interest going to an elite sector aggravates the problem of low aggregate demand while also setting up the country's financial system for another credit meltdown - that could lead to a depression.

Of course, it ought to be 100% obvious to anyone that if austerity measures are now superposed on this, we may be looking at a total calamity. In that case spending would be strangled even worse that the existing "sequester') measures, and if Social Security and Medicare are also hit, growth would plummet by 4-5% a year, in fact hurling us into a recession.

Already, the House Republicans have cut an effective $36 a month from the Food stamps program sending millions to food banks to try to make up the difference. A new Farm Bill is pending but the Repukes want $39 b cut over ten years which would send nearly 25 million kids into a state of hunger and malnutrition. The Dems aren't as bad, but even they are asking for $4.1b in food stamp cuts. Have these people never been hungry?

Now, add to all this the news the banks are thinking of adding fees to depositors if they get a measly 0.25% cut in interest on their reserves. What the hell is wrong with this picture? The problem is we are letting the banksters hold us all hostage and do whatever they want. Even as I write many of them are still dallying in the sort of toxic derivatives that nearly brought the whole house down in 2008. But what did they get? A slap on the wrist!

 Some GOP and Tea Party idiots whined about "socialism" when Obama's 2009 stimulus was enacted -but let's not play games with words here. A real socialist would have not just bailed out the banks but would have nationalized them, then kicked all of their CEOs, and other honchos to hell off, and replaced them with government financial specialists. (People like Liz Warren).  In a real socialist environment, the banksters would be howling "Uncle!" and worse.

Of course, few economists (most invested in the Pareto model of economics, see e.g.

have endorsed Prof. Kennedy's views or emerged to reinforce her assertions. Most are just fine with interest bleed off since they're often the beneficiaries of its bounty - as when they (e.g. like Glen Hubbard - the evil genius behind the Bush tax cuts) when they advise large financial outfits.

Thus, since interest adds to the balances of the top 1 percent it reinforces the meme that wealthy dollars have 'higher utility' - as opposed to say Social Security dollars  - where people in old age can collect it merely for waking up and breathing each day. In this case, rational solutions - say like cutting interest rates on student loans (say down to a reasonable 2%) , would not go over well because it deprives the finance mavens of much more money to build giant haciendas with Olympic size pools, or more personal jets and blood diamonds.

Why aren't the media raising the issue? Well, because they are averse to being seen as "ideological". Media specialist Robert McChesney argues that any mainstream journalist would be going out on a limb to pursue this story - for the same reason he would if he pursued a story that the Warren Commission is all hogwash and Oswald had nothing to with it. In either case, he'd be seen as "having an axe to grind, ideological or some sort of a hack". 

Rather than that better to pose as being "objective" so you give the anti-global warming blowhards the same space as climate scientists, while you deny any space for anti-Warren Commission journalists since - god forbid - that would be like supporting a "commie lone nut". And to go against credit and INTEREST! That'd be like arguing against Mom, apple pie and the flag!

But this attitude, as McChesney observes "makes journalism worthless on pretty important issues."

I totally agree, which is why I read widely outside the narrow and biased corporate media orbit.

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