by Lee Adler, Wall Street Examiner
One of the purposes of ZIRP (zero interest rate policy) was ostensibly so that banks could rebuild their balance sheets through suppressed funding costs allowing them to earn a wider spread and increased profits. Theoretically that would add to their capital.
But in the chart below we see that over the past month the growth rate of bank capital has fallen to zero. Either banks aren’t really making the profits they are reporting or they are paying out 100% of them in dividends and share buybacks from executives who had received the shares in stock option grants. This is looting, pure and simple. When no bank executives are held responsible and punished for causing the endemic wave of control fraud that caused the crash, the looting of the system will just go on and on. Worse than that, it’s a virtual financial rape of the savers who should be getting that income.
The Fed’s H8 weekly statement on the aggregate balance sheet of US commercial banks reflects the trend of bank capital via the Residual line item, which is the difference between assets and liabilities. The growth rate of bank capital has been trending down since 2007 in spite of a zero cost of funds, which is supposed to boost profits. Obviously, it’s not working.
Bank Capital – Click to enlarge
While the Fed has been cashing out the banks week after week, month after month; while they have access to limitless amounts of free cash; while their balance sheets continue to expand exponentially, the US commercial banksters have not added one red cent to bank equity over the past year. They continue to bleed the system while the Fed and the US Government stand idly by allowing, promoting, and subsidizing this legalized but morally criminal skimming of the system.
Meanwhile, your grandmother’s life savings have been wiped out by the same ZIRP that supports the banksters. It forced her to spend down her principal instead of the interest income she should be earning.
This is why I call ZIRP “Bernankecide.” It is the mass financial murder of America’s middle class elderly who had saved all their lives. Instead their savings are confiscated to support the criminal masterminds who run the world banking system. This hideous policy first rapes the victims repeatedly over a long period, and then it leaves them for dead, often on financial life support paid for by their fellow taxpayers.
This crime against humanity will only end when interest rates are allowed to rise to levels that provide a reasonable return for low risk savings accounts and when the criminal masterminds who ran the massive frauds that led to the crash are ultimately forced to bear responsibility for it. Allowing interest rates to rise would also allow a return to rational investment decision making, where instead of mindless speculation on the direction of Fed money printing, investors could make rational decisions based on real risk and real rates of return.
I have no faith that those steps will be take in time to make a difference. Instead the system will again hurtle towards another massive collapse, further damaging the US economy’s ability to ever fully recover. We would be on a long term downward spiral that would have no happy ending.
Table of Contents for full article in Professional Edition
Macroliquidity Component Indicators
Fed Cash to Primary Dealers
Foreign central bank purchases
US commercial bank deposit flows
Bank Treasury purchases
Bank Trading Accounts
Bank reserve deposits
Treasury Auctions, Federal Revenues and Supply Impact, and Treasury Yields
Open Market Operations (OMO) and Monetary Policy Actions
Other Policy Tools and Total Fed Credit
Other Fed Balance Sheet Items – Liabilities
Bank Loans Outstanding
Foreign Central Banks
Fannie and Freddie
Money Supply and Fund Flows
Bank Holdings of Treasuries
Bank Capital Trend
Click here to download complete report in pdf format (Professional Edition Subscribers) including 36 pages of charts and clear, cutting edge analysis that you can use to gain an edge in the market. Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you a full refund. It’s that simple. 30 day risk free trial for new subscribers. Click here for more information.
3 month subscription to the Wall Street Examiner Professional Edition, Money-Liquidity-Real Estate package, renewing automatically unless canceled.
Enter your email address in the form to receive email notification when Professional Edition reports are posted.