Ellen Brown: Fox in the Henhouse: Why Interest Rates Are Rising

The Federal Reserve

The Federal Reserve. Photo courtesy TruthDig.


Ellen Brown’s latest article in TruthDig tackles the Fed’s current penchant for raising its benchmark interest rate — and the disastrous effects it’s already having. Ellen says the Fed’s reasons don’t pass the smell test. Instead, it’s another case of follow the money: Who benefits from increasing interest rates? Good guess ... the banking sector (and, naturally, the Fed’s seven member Board of Governors).

Ellen writes:

“Wall Street calls the shots, and Wall Street stands to make a bundle off rising interest rates. ... The Federal Reserve calls itself independent, but it is independent only of government. It marches to the drums of the banks that are its private owners. To prevent another Great Recession or Great Depression, Congress needs to amend the Federal Reserve Act, nationalize the Fed and turn it into a public utility, one that is responsive to the needs of the public and the economy.”

Ellen continues:

"Alarmed commentators warn that global debt levels have reached $233 trillion, more than three times global GDP, and that much of that debt is at variable rates pegged either to the Fed’s interbank lending rate or to LIBOR. Raising rates further could push governments, businesses and homeowners over the edge. In its Global Financial Stability report in April 2017, the International Monetary Fund warned that projected interest rises could throw 22 percent of U.S. corporations into default.

"If the Fed follows through with its plans, projections are that by 2027, U.S. taxpayers will owe $1 trillion annually just in interest on the federal debt. That is enough to fund President Trump’s original trillion-dollar infrastructure plan every year. And it is a direct transfer of wealth from the middle class to the wealthy investors holding most of the bonds. Where will this money come from? Even crippling taxes, wholesale privatization of public assets and elimination of social services will not cover the bill."

Ellen quotes a 2016 article in the Wall Street Journal:

“While struggling with ultralow interest rates, major banks have also been publishing regular updates on how well they would do if interest rates suddenly surged upward. … Bank of America … says a 1-percentage-point rise in short-term rates would add $3.29 billion. … [A] back-of-the-envelope calculation suggests an incremental $2.9 billion of extra pretax income in 2017, or 11.5% of the bank’s expected 2016 pretax profit. …”

[Read the full article]

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