Here's an Idea! Let the Fed Drop Money into Your Bank Account Instead of Raining it Down on the Rich

[xchrom]

http://www.alternet.org/economy/heres-idea-let-fed-drop-money-your-bank-account-instead-raining-it-down-rich



The Federal Reserve is the only central bank with a dual mandate. It is charged not only with maintaining low, stable inflation but with promoting maximum sustainable employment. Yet unemployment remains stubbornly high, despite four years of radical tinkering with interest rates and quantitative easing (creating money on the Fed’s books). After pushing interest rates as low as they can go, the Fed has admitted that it has run out of tools.

At an IMF conference on November 8, 2013, former Treasury Secretary Larry Summers suggested that since near-zero interest rates were not adequately promoting people to borrow and spend, it might now be necessary to set interest at below zero. This idea was lauded and expanded upon by other ivory-tower inside-the-box thinkers, including Paul Krugman.

Negative interest would mean that banks would charge the depositor for holding his deposits rather than paying interest on them. Runs on the banks would no doubt follow, but the pundits have a solution for that: move to a cashless society, in which all money would be electronic. “This would make it impossible to hoard cash outside the bank,” wrote Danny Vinik in Business Insider, “allowing the Fed to cut interest rates to below zero, spurring people to spend more.” He concluded:

. . . Summers’ speech is a reminder to all liberals that he is a brilliant economist who grasps the long-term issues of monetary policy and would likely have made an exemplary Fed chair.

Maybe; but to ordinary mortals living in the less rarefied atmosphere of the real world, the proposal to impose negative interest rates looks either inane or like the next giant step toward the totalitarian New World Order. Business Week quotes Douglas Holtz-Eakin, a former director of the Congressional Budget Office: “We’ve had four years of extraordinarily loose monetary policy without satisfactory results, and the only thing they come up with is we need more?”

[JimboBillyBubbaBob]

1. I could surely put it...

...to a more society improving and patriotic use.

[roamer65]

2. Summers is an idiot.

If your rates are near zero, you don't go to below zero. It will have no effect other than destroying what little remains of interest income for many retired people. You go to LARGE tax credits for the working poor and families. You also greatly increase tax rates on the wealthy, to prevent their hoarding of money.

[RC]

3. What! Are you crazy?

That would probably work. Money for the poor? Then 'those people' might not be so poor anymore. Us rich can't afford to pay for that, we have our own priorities, priorities that doesn't include 'those people'.

Just in case -->