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ZIRP Lending Won't Stop US Depression
In our present case, all we have to do is look to Japan. For a dozen years, I used to debate with other online economists, the Great Depression of Japan which began roughly when I began regularly posting on the internet, back when it was very small and mostly academic in nature. People like Brad Setser, for example, spent endless time arguing with me that talking about Japan was stupid and fruitless because we would never end up like Japan. Well, here we are, as I predicted back in 1996, like Japan in every single way except for one key way: we let in millions of illegal aliens and we have no trade protections. Japan has been mired in a ZIRP (zero interest rate policy) banking world which, far from making the Japanese people rich, has made only the rich in Japan richer. Dropping wages, offshoring of Japanese jobs, replacing people with robots and bringing spiritual and domestic despair into 80% of the nation has driven Japan to the brink of literal extinction. The rich are barely taxed while the government has accumulated the world's biggest debt to GDP ratio. Japan's collapse is accelerating, not slowing down. The once-famous ‘equality in wealth' of post-WWII Japan is now a lie. The gulf between the very rich and the rest of the nation grows massively just as it is in Britain or the US. The only thing the working class of Japan sees growing this last 20 years of depression is the national debt which will be collected off of them, not the rich. Just as the UK and US is heading: same problem and same inability to tax the wealthy corporations and the bankers responsible for the global credit bubbles. For all that ZIRP lending by central banks create is ‘carry trades'. That is, even now, after claiming the credit bubbles won't happen again due to the global slowdown, we see this happening in all higher-interest rate countries. The thing that puzzles many economists in the US is the fact that cheap, ZIRP lending rates isn't turning into another housing bubble. Why is this? Well, we look at Australia which has a much, much higher interest rate on housing loans, and they are flooded with lending offers. Just as when the US had much higher rates, a trillion dollars suddenly became available to anyone willing to sign a contract…the profit between the loan and the source of the lending (loans from ZIRP central banks in other countries) was immense and made local bankers much richer! So the US is now the source of lending for housing in Australia, not the US. This is due to Australia's spread being so great, the bankers make more money lending to Australia whereas they make much less, lending in the US. Ditto with China: the spread is very attractive but the central government has used draconian tools to stop a flood of carry trade ZIRP dollars from pouring into China's real estate markets. This is putting a major squeeze on world finances. And should have been done by the US back in 2003. Except it was very politically popular to allow the Japanese carry trade debts to flood our markets, it created jobs and gave the average US property holder the illusion of getting richer due to rising housing values. The fundamental basis of our GDP surge and our economy was debt on housing used to buy consumer goods. We loaded up on debts thinking that we could do this forever, the Japanese carry trade would always flow to the US. Now, it flows elsewhere. We are now Japan. And this means, never getting out of the depression via lower interest rates. This cannot work and doesn't work. Japan's failure to exit their own depression via ZIRP shows us the futility of using the Fed's cheaper rates to revive our own economy. The Associated Press: Fed chief focused on keeping recovery alive
Wow. Look at the last paragraph!!! Insane! How on earth do keeping ZIRP rates prevent deflation??? The example of Japan should sober even fools. We can't miss it! Japan's cheap rates fixed nothing in Japan, it created a global carry trade mania that created the bubbles identical to the one that destroyed Japan's domestic economy! How on earth can Bernanke and the delusional staff working for him, imagine that a ‘prolonged drop in prices…goods…stocks…homes…wages' is remote? It is obviously the opposite: it is most probable. Nearly inescapable, this drop in all other things is due to a drop in wages. And offshoring our business has been good for the very top elites and a total catastrophe for the rest of us. The illusion of ‘no inflation' was created by destroying US jobs and sending them to cheaper places.
Elaine Meinel Supkis Born at Yerkes Observatory, grew up on many observatory mountains and secret government testing grounds, burr under the saddle of the Real Rulers of America since childhood, family black sheep with three bags of wool, pulled down more than one politician in life, winner of the "Struck by Lightning Indoors" award for most hits in lifetime, three direct and seven glancing blows. Now living on a mountain with horses and cats and dogs and chickens and a husband. Yikes.
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One of the stupidest ideas on earth is, the Federal Reserve's central banking system works to prevent bubbles, stop the endless ‘business cycle' of ups and downs and create jobs. It obviously has totally and utterly failed at all of these things! Pretending that it does these things is foolish. When we have to choose a path to take, the best thing to do is to look at who else is on this path and then see where they are already. 
