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Ear to the Ground

Banks Gamble With Almost-Free Money

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Posted on Nov 24, 2009
Wikimedia Commons / Henry Han

The Fed has been lending money at record-low rates, but instead of passing on the cash to businesses and consumers, big banks are rolling the dice in the financial markets. China and Japan have warned that these American high jinks could once again upend the global economy.

The Federal Reserve Board is aware of the problem, as minutes from its latest meeting show. But, at this time, the Fed doesn’t consider the risk dangerous enough to take action.  —PZS

Bloomberg via Eschaton:

Financial officials in Japan and China, Asia’s two largest economies, said last week that the Fed’s interest-rate policy risks spurring speculative capital that may inflate asset prices and derail the global economic recovery.

“Participants noted that the recent fall in the foreign exchange value of the dollar had been orderly and appeared to reflect an unwinding of safe-haven demand in light of the recovery in financial market conditions this year,” the minutes said. “Any tendency for dollar depreciation to intensify or to put significant upward pressure on inflation would bear close watching.”

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By WriterOnTheStorm, November 25, 2009 at 5:07 pm Link to this comment

The banksters are borrowing at .5 to 1.5 percent, and putting the money in
foreign banks, like those in Brazil, where it can earn up to 7 percent interest. Bad
for us, but good for Brazil. It’s not cheap to clear-cut rain forest for cattle
ranches.

The fact that this article gets so little comment surprises. Does it mean that we are
suffering from scandal fatigue in the economic sector?

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By ChaoticGood, November 25, 2009 at 12:18 am Link to this comment

A fiat currency, propped up by military might and inertia, dubbed the base currency for the world because the only other currency that is big enough is the Euro and that does not have the safety of military might behind it.
In this Kabuki theatre, the shadow money is real. Don’t wake me, I’m dreaming that I am rich…

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By freedom loving american, November 24, 2009 at 10:21 pm Link to this comment

What the cornerstone of capitalism being dishonest, you must be jesting?
These are the same organization that were hoodwinked by all the crafty bourgeois Americans a few years back regarding home loans these people did not qualify for and could not afford to pay back, so these good hearted chaps kindly took their homes and then gently forced them into bankruptcy (I wonder why there is a bank in bankruptcy). Then the American taxpayers gladly baled these benevolent good-doers out to the tune of 6 trillion dollars and counting.
Next the same poor banks that somehow got caught up in the credit-default swaps scam which is so complicated no one understands but because they are such a loving caring organization they went ahead and gambled I mean invested 100’s of trillions just to help out the poor wall street billionaires (I believe you needed investments of at least 10 million to purchase these instruments).

Now you are claiming these kind jovial souls are making risky investments, surprise surprise surprise!

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