Sheila Bair was the head of the Federal Deposit Insurance Corporation (FDIC) from 2006 through 2011. Since she stepped down from her post, she’s been talking about the Crisis on and off…
Financials aren’t the focus of this blog, but this article is worth your time.
For several years now, the Fed has been making money available to the financial sector at near-zero interest rates. Big banks and hedge funds, among others, have taken this cheap money and invested it in securities with high yields. This type of profit-making, called the “carry trade,” has been enormously profitable for them.
So why not let everyone participate?
Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.) Read the whole thing
Obviously this is satire and it won’t be the last. This is a situation where only those with much to lose have the power to start us down the road to recovery by acknowledging the problem: You can’t fix a debt problem by adding more debt.
But until then, enjoy the circus.