90% of stocks are owned by 10% of the
people. Propping up stock prices is not crucial to the survival of the average
man. The stratospheric heights of the stock market have been produced by the
dispersal of unlimited credit to certain favored bankers who don’t have to
obtain funds by hanging up a shingle with an interest rate that is high enough
to entice savers to walk through the door. A fire hose of money is pumped
into their institutions which then park a lot of that money in the stock market
either directly or through collateral beneficiaries of the fraud. So, why
do we allow the politicians and the news readers to suggest that the health of
the economy is based on the height of the stock market? Most normal savers
would benefit from a posting of actual market interest rates in bank
windows. The real interest rate is out there. It is merely
obscured.
For
decades, a gallon of gas was set at a nickel in Venezuela. The real gas
price was out there to be discovered by the market, if it had been allowed to
do so. The technocrats are still working to find that price in Venezuela, but
they will never be able to do so without market signals. The same goes
with interest rates in the U.S. If the fed went all Volker on us and
stopped shooting out money to privileged banks at fake low interest rates, we
would eventually know the market interest rate. What kind of a sign would
a bank have to hang in its window to get broke Americans to walk in the door
with their piggy banks? How much interest would they have to offer to
overcome fears of inflation or loss from an unstable banking system? What are
the actual time preferences of American savers contrasted with legitimate
vetted entrepreneurial demands for funds?
The
market would sift through those things and reveal the real interest rate for
the U.S. economy — if allowed to do so. Is it 12%? Or 24%? Who
knows. It is clear that it would be way higher than it is now. And
many people would be glad for it to go way up. A cautious old lady who
wants to enhance her savings or her fixed income should be able to reap the
benefit that thrift would bestow upon her. The way it is now, she can’t.
If it would take 24% interest to make some Americans switch from consumption to
savings, they should be able to earn that reward if the unhampered market would
offer it to them.
So, back to the original point. Most people are not big
beneficiaries of an extremely over-valued stock market that is the result of
artificially low interest rates. Even people of lesser means could
benefit if a lower time preference was rewarded by a pat on the back in the
form of higher interest rates on savings. All that the artificial low
rates have produced is an explosion in the prices of housing, stocks,
education, vehicles, medical services, etc. Even many libertarians
say that, “We will have to endure some pain to straighten this thing out. “
But, it makes no sense to say that normal people would be harmed by legitimate
interest rates that encourage and reward savings. Sure, the stock
market would find more reasonable levels. But, that wouldn’t take food
away from the common man. Higher interest rates on savings benefit the
average man a lot more than high stock prices.
David
Hathaway [send him mail] is a former supervisory DEA
Agent. He is the author of the book “EMP Hoax” that was released in January,
2018. He is a cowboy and aficionado of Latin America where
he has lived and traveled extensively. He is a homeschooling father
of nine children and maintains the website charityendureth.com.
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