WE MAY BE TRAPPED IN "ZIRP WORLD": A 2008 Gamble May Have Changed America Forever

WE MAY BE TRAPPED IN "ZIRP WORLD": A 2008 Gamble May Have Changed America Forever

ZIRP Has Given America "Financial Diabetes," Say Experts

In 2008 America faced the worst financial crisis since the Great Depression. One major bank had failed and others were at risk of collapse.

To save our economy, the Federal Reserve gambled by going pedal to the metal with its accelerator, slamming bank interest rates all the way to Zero. This Zero Rate Interest Policy (ZIRP) made money virtually free for our biggest banks.

This wild new policy was supposed to save these banks and start them lending again.

However, as monetary expert Craig R. Smith and veteran think tank futurist Lowell Ponte write in their new White Paper The ZIRPing of America: The Federal Reserve's Zero Interest Rate Policy (ZIRP) Is Hazardous to Our Economic Health, this caused crazy unintended consequences.

"Imagine those episodes of 'Star Trek' where the Starship Enterprise escapes danger by going into warp drive, only to find itself in a whole different galaxy where the old familiar laws of economics and star charts that point the way home no longer work," write Smith and Ponte.

ZIRP, which has continued for the past 7 years, made the biggest “Too Big To Fail” megabanks 30 percent bigger than before. It got them lending again, but because of new rules against making "risky" loans, most of this money has gone to the biggest corporations and to government....not to ordinary Americans with upside-down mortgages.

"ZIRP was supposed to stimulate economic growth, but instead it frightened businesses out of expanding or hiring because of fear that it would create a tidal wave of inflation. It became an anti-stimulus policy," says Craig R. Smith.

"Banks could get easy money without customers having bank deposits, so the interest rate banks paid depositors has fallen close to zero," says Lowell Ponte.

"Together the Federal Reserve and Federal Government are shafting bank savers with deliberate 'financial repression,' a policy of holding the interest rate savers are paid below the rate at which inflation is eating up the value of their account," says Ponte.

LESS THAN ZERO

"Even crazier," says Ponte, "is that in Europe – and coming here soon – banks are starting to charge 'negative interest rates.' This means that savers have to pay the bank for the honor of putting their money at risk in an account there."

In their fifth and latest book, Don't Bank On It! The Unsafe World of 21st Century Banking, Smith and Ponte warn of 20 major risks bank depositors now face.

These risks include new laws that, in effect, give banks and the government de facto ownership of your bank account.  Another risk is that the Federal Deposit Insurance Corporation (FDIC) has only enough reserve to protect $1 out of every $14 in bank accounts it claims to insure.

Smith and Ponte explore the danger of computer hackers stealing your bank account. In February 2015, a study by computer security firm Kaspersky Lab found that clever hacks have recently stolen as much as $1Billion or more from 100 different banks.

"Bank accounts used to be safe and pay reasonable interest as an incentive for saving," say Smith and Ponte. "But today bank accounts come with 20 big risks and very little reward. It no longer makes sense to keep much in a bank account, especially when safer and more rewarding alternatives exist."

The Federal Reserve acknowledges that its ZIRP emergency policy of 2008 is today doing more harm than good – and is wrecking the economy for those who depend on interest: bank savers, retirement funds, insurance companies and more.

Since ZIRP began, worldwide debt has grown by $57 Trillion to an astounding $200 Trillion. ZIRP fed this easy-money diabetic financial obesity, but any attempt to cure ZIRP's ills by raising interest rates will make such debt even more impossible to pay off.

What Smith and Ponte explore in The ZIRPing of America is how all this easy money has given our biggest companies and government “financial diabetes.” They may be unable to return to an America of traditional 3%-6% rates for borrowing money.

THE ZIRP TRAP

If the Fed tries to end ZIRP by raising interest rates beginning in June, this could soon cost taxpayers an extra $1 Trillion or more each year in interest for the huge debt our bloated government built up over the past seven years when interest rates were zero.

"ZIRP World has become a Trap that will be hard to escape," says Smith.

The warp drive the Fed used during the 2008 financial crisis might have permanently changed our economy.  This could be why growth and hiring remain anemic, and our once-robust economy remains weak.

The one supposedly-bright spot of our economy is the stock market, soaring to the edge of 18,000.  This is an illusion, a mirage, warn Smith and Ponte.

ZIRP and $7.5 Trillion mostly printed out of thin air by the Fed and Treasury have turned Wall Street into a casino flush with easy money. Companies run on borrowed cash while creating deceptively high stock values by buying back their own shares.

One recent study calculates that ZIRP, the QE (Quantitative Easing) policy it produced, and bookkeeping gimmicks have overvalued today's stocks by at least 86 percent.

Stock values have also been pushed up by ZIRP and the Fed forcing reluctant savers out of their bank accounts and other traditional "safe" havens in a desperate effort to get more return and yield for their money.

"Former savers are being herded into the risky stock market," says Ponte. "In today's stock market, you are the sheep, the livestock being sheared or worse."

"If interest rates go up," warns Ponte, "don't be surprised to see the artificially inflated stock market go a long, long way down."

To schedule an interview with Craig R. Smith or Lowell Ponte, contact: Bronwin Barilla at 800-950-2428 or email This email address is being protected from spambots. You need JavaScript enabled to view it. .

 
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