What’s more, the loan volume is so high, that banks are offering loans for $180,000 at a 0.25% interest rate instead of 2%.
The federal government isn’t giving the loan companies enough cash to deal with the debt. How will this help small businesses with the high interest rates?
These are just a few examples- why don’t you think of all the ways the government doesn’t like to spend $120,000+ per home and how the banks are gobbling up those loans? But of course, even though this seems so obvious, none of these issues is as simple as it may seem. In a recent interview , one Small Business Administration official said some of the lending is not being done out of an informed effort to help Small Businesses but rather to keep loan costs down for others. If one of the biggest banks were being so wasteful with all of the funds at their disposal why didn’t the Treasury Department step in and cancel every single loan? Well, the reason is actually the same reason you can’t cancel your credit cards, phone bill, and cable, internet and email bills: the government cannot do anything about it because it’s so large and so involved. The “government” wants to be involved. So, why wait to intervene if the problem is just too big and too systemic?
I suspect the answer is because no one sees any big systemic issues with the country, and since the Federal Reserve, which is supposed to keep an eye on the economy, doesn’t see any major issues, none of the regulators (the agencies that would be in charge of protecting the country) have the time or money to do anything. When you look at the government’s actions over the last decade, the fact that they don’t notice any of the problems with the money supply is no excuse, and shows that they don’t really care, either. How can you get mad at the government when the government doesn’t even think bigger? By now, the US government really believes there isn’t anything wrong, and isn’t willing to spend any more time trying to get to the root. The Federal Reserve could actually be in charge of the economy, but it doesn’t see itself as a government agency because it’s not a government agency; it’s a corporation. The main problem with the Federal Reserve is that it’s not trying to do anything but keep the money supply stable, and that money supply has really hit an all time high, if I remember correctly. We’ve had a number of recessions in our history (if you haven’t been paying attention, the last two of which were caused by the Fed’s intervention in the banking system in the early 1990s, and that was in a time where the US was in the midst of a economic boom) and we’ve had deflation (the US economy fell into a depression in the 1990’s).
The federal government doesn’t need to do anything to help our economy, and it can’t because of its massive size and vested monetary interests. The US government thinks it will work a little miracles if it spends $120,000 a home, so why it won’t do anything that reduces the amount that it loses every year, I don’t know. I actually have some insight into this because I just read this article from earlier today , which describes how the Federal Reserve was going to attempt to “restore confidence” in our economy by buying “too much Treasurys”. The theory behind the purchase is that it would decrease the amount of money in the economy, and therefore, people would start spending more, which would increase economic growth, thereby preventing many of the losses we’ve had recently. According to Bloomberg, the purchases were supposed to boost GDP growth in the second half of 2010, but they went on “for months but never really slowed the overall pace of growth in the U.S. The purchases were halted late last summer after the U.S. government cut its main lending rate for the nation’s largest loan agencies by half a percentage point to near historic lows.” Even worse, those loans were to the big banks, and they used them as collateral for their own short selling and the “wealth effect”, which is a form, of the Bernanke hypothesis; the belief that big banks would flood the market with more debt (which will drive down interest rates, which will reduce the money supply). When Bernanke told Congress, “the only real threat to the economy at present is noninvestment spending and speculative gambling”, he didn’t mean this. He really meant that we’d start to see a bubble starting up, and I suspect that’s exactly what’s happening at the moment. All we’re doing is trying to slow down the bubble. The end result is that we’re not even getting the interest payments back to us. The Fed wants people to believe that our economy is thriving, but what we’re actually seeing is that