Originally published March 23 2015
Big banks have become huge criminal enterprises waging war against the people
by J. D. Heyes
(NaturalNews) Have the big banks stopped being banks? If you believe the banking insiders speaking in their own words, then you would have to conclude the answer is yes.
In a recent interview with Bloomberg News, Niels Storm Stenbaek, chief economist at the Danish Bankers Association, said this: "Banks don't have a need for deposits, and the demand for loans by households and firms is weak."
As noted over at Washington's Blog, that is a very odd statement, because don't banks exist as receptors of money (as in, savings and checking accounts)? And aren't banks in the business of making loans (because the interest charged on loans is primarily how a bank is supposed to make money)?
Not according to Stenbaek. So if banks no longer exist to make loans and serve as holders of your money, what are they doing?
The fact is, banks -- big banks, especially -- are behaving less and less like banks. Ever since the Great Recession bailed many U.S.-based mega-banks out with your money, the Federal Reserve's QE -- quantitative easing -- program has poured trillions of artificially created dollars into the world's biggest financial institutions, and it's why banking profits are through the roof, despite the fact that, you know, they don't make many loans and they're not worried about deposits.
Inflation (for government) is a good thing
The trend of decreasing loans and de-emphasizing deposits began at the supposed end of the Great Recession. In 2010, USA Today reported:
Banks that received federal assistance during the financial crisis reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn't get aid....
For the period ending Sept. 30, 2009, lending fell by 9.1 percent, the paper said.
More than five years later, the big banks have amassed a treasure of more than $1.8 trillion, thanks to the Fed's QE program, so their bottom lines look good -- but they are still not lending like they should.
Maybe that's a good thing, though. As noted by The Economic Collapse Blog, pouring a tsunami of cash into the economy could cause massive inflation of the sort that the Fed and all the financial geniuses on Wall Street say they want. As reported by the Wall St. Cheat Sheet a year ago:
Government officials and central bankers will sometimes make statements to the effect that a little inflation is a good thing and that deflation needs to be avoided at all costs. From the perspective of an individual, deflation would actually be a good thing. Wouldn't it be great if the prices of things we want to buy -- cars, houses, clothes, stocks, etc. -- went down in price?
Yet from the government's perspective, just the opposite is true: Inflation is a good thing. There are two reasons for this.
What a mess
-- The U.S. government is highly indebted, to the tune of more than $18 trillion (officially), or more than 100 percent of annual gross domestic product. "Because of this, the government benefits if the value of this debt decreases, and this happens when there is inflation," Wall St. Cheat Sheet noted. "Inflation causes each dollar to be worth less, and so an indebted entity such as the U. S. government, which has, in effect, a negative amount of dollars, is better off if those dollars are worth less."
-- In the second place, inflation leads to a rise in prices and the government can then tax those nominal gains, even if those gains do nothing to boost consumer purchasing power.
One additional facet is at play here, or could be, and that is the issue of interest rates. One reason why the Fed has held interest rates down is because the federal government is so leveraged.
As noted by the Heritage Foundation, two-thirds of government spending is mandatory and, in 2013, 6 percent of the government's budget was spent on interest payments (and remember, the federal government runs serial deficits). If interest goes up, so do government interest payments, making the deficit even worse.
Uncle Sam has gotten himself into quite a financial mess. Eventually, however, the debt bomb will explode.
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