Little Guy Is Caught in the Middle--Again
Bank profits up! Interest on deposits down! Prime rate down! Federal bank reserve requirements up! Thirty-year T-bill yields competitive with the prime rate!
What we are experiencing is a government/bank welfare scheme at the expense of the rest of the economy.
The government has raised the reserve requirements and allows the banks to count their T-bills as reserves. This eliminates the banks’ need to consider any loan that might be a risk because they can make a 100% return on the “suckers” deposits by loaning it to the government.
The government does not have to compete for the money, and is guaranteed an almost endless supply of borrowings to float its deficit, at an interest rate that makes them look good.
The little guy, caught in the middle as usual, cannot get a loan to buy a house, car, or much else that might stimulate the economy.
Increasingly, it seems that the government is either a vicious competitor, ruthless regulator or an inept supplier to the private sector.
W. GARNETT
Los Angeles
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