http://www.wenningadvice.com/?tag=federal-reserve-board

Back around 2008, I posited that the U.S. was going exactly backwards, bailing out the crooks while ignoring the victims, the millions of people who lost their retirement or their homes.  Surprise, surprise, the crooks are now doing fine, while the victims are often still struggling to recover and, in many cases, failing. All reflected in the recent focus on financial inequality, of course.

I suggested back then that a real problem was effective deflation.  The dollar was holding steady or even gaining value, depending on how one does the comparisons with purchasable goods or other currencies.  So long as this continued, the incentive was tilted towards more of the same.  Why invest your dollars and take a risk, when one can simply sit on the cash and wait for it to appreciate?  Such a syndrome is hard to break free of, and we haven't.

In fact, latest reports indicate that it would require a negative interest rate of about 6% just to force actual inflation.  I.e., the banks would pay YOU for taking out a loan.  The banks, meanwhile, have been in a quandary over the fact that hardly anyone is paying enough interest to make the current effective 0% loans economically viable on the face of it, yet they are not really able to run on zero income.  So, the customer fees go up.  Forget about that free toaster oven.  Be grateful that they will still accept your money at all - and note that some  banks are charging fees to store your cash.

Bottom line: loans have been really hard to justify to the lenders at 0.25%.  Will it get better at a negative interest rate? The banks are looking for the best ROI, of course, and, given the risk factors vs. deflationary returns, even the whiff of risk can sour a deal.  Meanwhile, it's perhaps useful to consider this variation on "que bono" - who profits?  Who IS getting the loans, or have we willy-nilly or by specific intent created the perfect conspiracy, a system in which the invisible "Aristocracy of Pull" is overlaid on top of the usual market decision process.

http://econlog.econlib.org/archives/2008/12/the_aristocracy.html

The money that can't find worthy borrowers then sits there, right where it has been since about 2008 and until the deflation ends.

And on innumerable levels and aspects of our corporatocracy, we find more and more, it seems, that those members of the invisible implicit aristocracy have discovered ways to enhance the natural advantage of capital. E.g., the patent trolls, including the corporate Knights of the Court, richly compensated for their dark skills at forcing small, innovative companies to hand over their prize inventions on peril of being ruined in court via endless Pyrrhic victories.  Or, the police forces, Ferguson and nationwide, using their connections with local judiciaries to rake in the fines and seizures, cashing in on outrageous salaries paid for by the fines and then retiring in splendor. Or the various state licensing systems that have been shown to universally reduce quality at higher costs... I could go on. 

The bottom line is that we are being devoured from within by our misplaced trust in a sociopathic system whose crowning achievement is symbolized by the FISA court - a modern day Star Chamber - one court to rule us all, unaccountable and unlimited, signing the lives away of people who are convicted and incarcerated or killed without due process, even as we fearfully cling to the fiction of legality and justice at home to isolate ourselves from a dangerous world outside. Perhaps this possible "Aristocracy of Pull" in the banks will ultimately bring the entire system crashing down like the crackerjack homes blown away in Vanuatu.

Markets run on feedback.  The Invisible Hand summarizes the results of market decisions by innumerable participants.  When the principle of "Pull" replaces that information with privilege, the decision  process goes to hell, and we with it. Lies tend to require substantiation and victims. 

http://en.wikipedia.org/wiki/United_States_Foreign_Intelligence_Surveillance_Court

Enter my solution from way back then:  Put the money in at the bottom, not the top.  The demographics from 2008 to now point to a growing underclass, as middle class people lose those high-paying government and union jobs and end up working at Walmart or flipping hamburgers.  Meanwhile, the rich are getting richer, of course, and no small portion of that is due to the lingering effects of the bailouts and the deflation, of course, that makes their cash accounts appreciate.

Most of the victims of the debacle of 2008 were on the lower 2/3 of the income spectrum.  Most of the crooks were on the other end.  The "solution" of bailing out the rich crooks just resulted in their salting away funds to appreciate on deflation, as I predicted. So, let's equalize things a bit.  Somewhat belatedly, let's pay every citizen or legally working person in the U.S. $10,000.  No politics allowed.  EVERYONE means EVERYONE.  I would suggest repeating it every six months, announced in advance and requiring a special act of Congress to end. 

THEN we will have inflation.  Probably about 10% per year.  Meaning that people - especially those at the bottom of the spectrum - will of necessity spend more and get the general economy running at last, instead of stagnating.  Side effects may include getting people off welfare or other transfer payments that subsidize disability or laziness.  After all, how many people can actually live on minimum wage?  Easier just to go on the dole.  But then you have to prove your "need," often meaning that getting an actual job just requires a whole of work, with barely any real change in income - or a net loss, if you're paying a sitter to let you work.  If you have the $10,000 to start - free and clear and non-taxable and not legally permissible for offsets such as losing one's welfare, then maybe you can afford to work.

For someone making $200K+, the inflation will outpace the income, for a net loss.  (Altho the rich will also benefit indirectly from the reduction in demands for some kind of relief from the current underclass, as well as a reduction in social animosity.)   For everyone below that approximate $200K mark, there should be a net gain in purchasing power.

We know that the rules and the bureaucracy involved in these band aid government programs costs us enormous sums as taxpayers, while wasting the time of millions of social workers who could be doing real productive work, rather than executing nightmarish needs tests on the next person in the unending applicant line. Simply giving everyone the money undercuts the needs to begin with and removes the cost of the politics that accompanies any typical needs-based transfer payment.  Net, net, the end result is a lot of money saved, a lot of people's lives improved, and a return to a more normal economy - one where your money can be invested for a real return based on real productivity and one in which one can actually afford to be employed, even at a low pay rate.