Forget Cyprus, Nobody Is Stealing from Depositors More than Bernanke … After the Federal Reserve reaffirmed its easy money policy Wednesday, Chairman Ben Bernanke was asked whether the U.S. would ever think of taxing bank depositors as Cyprus has done. He said that was very unlikely but Jim Rickards, senior managing director of Tangent Capital Partners, says the Fed already has its hands in depositors' pockets. – Daily Ticker
Dominant Social Theme: Cyprus is "highway robbery."
Free-Market Analysis: This article makes the point that while the breast-beating continues over the Cyprus "haircut," the reality is that investors are getting fleeced throughout the world and especially in the United States.
We return once more in this issue to the reality of what central banking has wrought in the world, and especially in the US. It is the Internet that has enabled us to see this clearer, and in the beginnings of the 21st century, more and more do.
This is a danger to the entire central banking system. And it is no doubt well perceived by those in charge. The article excerpted above in the Daily Ticker expresses this well. It was also reprinted in Yahoo Finance. Like so many other articles expressing the same sentiment, it has gotten wide distribution.
This would never have happened in the 20th century. But in the 21st century, the dominant social theme of "central banking expertise" seems to have lost conviction. Here's some more from the article:
"Nobody is stealing more money from bank depositors than Ben Bernanke," Rickards tells The Daily Ticker. Bernanke's doing that, Rickards says, by maintaining interest rates near zero.
"At this stage of a recovery normalized interest rates should be around 2-3%," says Rickards. "Apply that 2-3%…to the entire multi-trillion-dollar deposit base of the United States of America and that's a $400-billion per year wealth transfer from savers to bankers so they can pay themselves bigger bonuses or make crazy bets." Over time, Rickards says, that wealth transfer could reach $1 trillion.
Rickards says zero interest rates are just one way the Fed is fleecing depositors. Others include increasing inflation, which Bernanke is trying to do, and taxing deposits like Cyprus is pushing for. "Bernanke is stealing more money from depositors than Cyprus is… looting everyday Americans—teachers, firemen and retirees," says Rickards.
This is strong stuff but, in fact, such criticism is voiced every day and there is really no way for the Fed to refute it. The defense that is offered doesn't mitigate the criticisms so much as point out that there are benefits, too, to Fed policy. The article continues …
There's another way, of course, to view Fed policy: that near-zero interest rates and $85 billion worth of asset purchases every month are helping to boost economic growth and employment and maintain low interest rates for both short-term and long-term debt.
Bernanke himself, testifying before the Senate Banking Committee late last month, said, "The benefits of asset purchases, and of policy accommodation more generally, are clear…monetary policy is providing important support to the recovery."
But Rickards says the easy money policy is creating asset bubbles that may feel good for now but will eventually crash. Cyprus could crash much sooner than that.
This is a most important point. Not that Cyprus could crash (it is in the process of doing so) but that on top of whatever the Fed is currently perceived as doing to savers, many expect a massive implosion based on extremely low interest rates that have prevailed now for half a decade.
What is not usually discussed in the mainstream press – or even the alternative media – is the amount of distrust and skepticism aimed not at market participants but at the system itself.
Over time, we have seen and commented on efforts of those charged with systemic oversight to do what has been done in the past, which is to blame Wall Street and big banks for the problems of the system. But in the era of the Internet, this is no longer working so well.
And this is a great challenge for those who have created the current central banking system and supervise it. Inevitable central banking implosions centralize wealth and make the system's controllers even more powerful. But when the system is too widely understood and seen as unfair then benefits come into question and may be seen as unfairly generated.
This article is yet another example of this evolving trend. It is a mainstream one, posted within a mainstream context, and yet it is comparing the terrible Cyprus crisis to business-as-usual at central banks!
The erosion of trust can be seen in articles such as this one – and thousands more that are published on a regular basis. Central bankers have a great deal to worry about these days but perhaps the most significant concern should be the erosion of belief in their ability to properly manage the economy.