Remember when banks used to make it worth your while to deposit cash with them?
Thanks to U.S. Federal Reserve policies that are holding market rates down near zero, you’re getting just a few basis points in interest (a basis point is one one-hundredth of a percentage point) on your cash deposits – and haven’t been for several years.
It’s bad enough that you’re getting practically no yield on your savings. But now the big banks – those greedy fellows that we taxpayers bailed out from a crisis that they actually caused – are about to start charging you to deposit money with them.
I’m not kidding.
There’s so much money floating around that the biggest banks that are sitting on the most of it and can’t – or refuse to – lend it out for any number of selfish reasons, now don’t want it stuffing their vaults.
So big depositors – who already weren’t earning anything on the savings they’ve asked big banks to hold and safeguard for them – will soon have to pay a fee for that questionable privilege.
There’s a litany of disturbing elements to this tale. But the most galling is this: It won’t be long before you and I are receiving notices of this unseemly new Big Bank tariff.
Welcome to the Brave New World of Central Bank Tyranny!
Sycophant central bankers here in the U.S. and over in Europe (and everywhere else, for that matter) have artificially manipulated interest rates down to nothing. That makes it possible for their masters – the big banks – to rack up record profits: They borrow from each other at one basis point and then go out and buy massive quantities of higher-yielding government bonds, cashing in on the “spread.” The United States, European countries, Japan, China and everyone else is happy, since they can keep running huge deficits.
In that equation, the banks don’t need to make loans to us.
Still, we need a place to park our money.
But now the big banks are saying that they have too much cash and can’t lend it fast enough. Of course, what they’re not saying is that they don’t want to lend it out to us at current low rates because, when rates rise, those loans will be “under water.”
The banks are fat and happy making so much on their risk-free government loans (that’s what them buying government bonds is all about; those bonds are nothing but cheap loans to profligate governments) that the extra money they have on deposit is starting to cost them profitability.
Yeah, you heard that right.
Here’s where it gets a tad technical.
Deposits are “liabilities” for banks. That’s because that depositor cash can be withdrawn at any moment. Loans are “assets” because banks are getting paid interest on them. When big banks’ deposit liabilities get too big they become a problem because they have to keep “reserves” against those deposits. Banks, especially with new banking laws and regulations, have to hold certain “assets” (usually U.S. Treasury bills, notes and bonds) in reserve against all those deposits that could leave in a flash if there is any kind of banking panic.
Big banks don’t have enough U.S. Treasuries to hold against deposits as reserves and at the same time use their stash of Treasuries to lend out overnight to other banks as collateral for overnight loans of more cash, so they can use that cash to buy – you guessed it – more risk-free Treasuries.
And why are there not enough Treasuries in the almost-$14 trillion world of U.S. Treasury securities? That would be because the Federal Reserve has been buying trillions of dollars’ worth of them from the big banks that have been buying them up to sell to the Fed, for a nice profit, thank you. And other central banks around the world have been buying Treasuries, too, for different reasons, but all good ones for them.
So the big banks got what they needed, to get bailed out. And they got what they wanted, to make record profits – yet again. And we all get hosed because the big banks aren’t lending to little people.
And soon enough now, we’ll have to pay them out of our own pockets to hold our money so we can write checks against our deposits and conduct normal banking transactions.
It’s Central Bank Tyranny. It’s the tail wagging the dog. The whole world has become one giant banana republic – with central bankers acting as militant officers enforcing the profitability schemes of the oligarchy of bankers that are the real dictators of our future.
Absolute power corrupts absolutely.
And we’re absolutely toast.