Elizabeth Warren: “If we really want to help the community banks, let’s start by getting rid of the $85 billion a year ‘too big to fail’ subsidy that we give to the biggest banks year after year”

It becomes more expensive, but prices will then necessarily fall to what people generally afford, and interest rates need not be so high if actual saving takes place. There is always a balance to be had if they stop meddling in what is an incredibly basic cycle. People save money. They could hide it under a mattress, or give it to a bank, who will lend it out (responsibly, lest they go bankrupt) in exchange for giving you a cut of the interest rates. When there's not a lot in savings (supply of money to lend is low), interest rates are high. Basic supply and demand. But then potential savers can make a higher return saving, so savings start to grow. Interest rates fall again, and people borrow to expand businesses, make purchases, etc. this is sustainable since there is actually the capital saved up within the economy to support these activities.

With the system we have now, savings are completely meaningless (but not without consequence). The interest rates are made artificially low, so people borrow to expand business, etc. Think borrowing money to create new housing developments in the run up to 2008. Everything appears to be going well, but underneath the surface, there is not actually enough real capital to allow people to consume what is being created. It is false wealth. Eventually the market always wins, and a crash occurs such as in 2008. People talk about lost wealth, but this is a misnomer as that wealth never actually existed in the first place. It was all a smoke and mirrors creation of the central bank.

This phenomenon also adds to people viewing "capitalism" as a zero sum game. In the first market based approach to interest rates and lending that I described, even the wealthy letting their money sit there in the bank helps the economy as a whole, because the only way they can gain on that wealth is by allowing it to be lent out. That money is used to expand productivity elsewhere, and the net wealth of society increases across the board. Nobody is poorer due to that person making a gain on their capital. In the system we have now, this function is hidden from people. They tend to think in terms only of the government taking that money and redistributing it. But this only moves capital around, and while that may appear to ameliorate problems in the short run, it does nothing to raise the overall wealth of a society. And if too much is redistributed, the entire thing falls apart. You can only tax what wealth was created through voluntary exchange, savings, and investment.

IMO the petro dollar will eventually cease to be the status quo, and the U.S. economic system will receive a very hard shock without the ability to continuously print money thanks to a global demand to buy dollars. That is why the military industrial complex is so strong, and why all presidents, supposedly liberal and conservative alike, engage in military activity in parts of the globe that either directly or indirectly involve the oil trade and the petro dollar. Those that high up in government are not stupid, just hubristic enough to think they can keep the charade going perpetually.

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