The discount rate.
"The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from their regional Federal Reserve Bank's lending facility--the discount window." http://www.federalreserve.gov/monetarypolicy/discountrate.htm
If you go back for almost the past 40 years, you will see the federal discount rate has generally been in the range of 5-8%, with a brief inflationary period. However, since Bush took over, the federal discount rate has been hacked to its current level of below 1%, and the official government policy now announced is that it should stay at below 1%.Historical Changes of the Target Federal Funds and Discount Rates - Federal Reserve Bank of New York
Historically, when our economy drifted towards a recession the government would reduce the federal discount rate slightly -- by 1/4%, or 1/2% -- to give a boost to the economy. The banks could borrow money from the federal government at a lower interest rate and they, in turn, would lend money to U.S. consumers at a low interest rate, and the consumers would buy U.S.-made products. Or, in the alternative, the banks could loan to U.S. businesses which could use the money to expand or buy new equipment, start a new product line, hire more workers. That is what happened when banks were local institutions tied to the U.S., a part of our local economy. They only loaned money to people in their geographical region, to be spent locally, to boost the local economy.
Today the term "bank" is almost quaint. There are no banks anymore. They have all been bought up by a few multi-national financial cartels which have various associated and related entities which control most of the financial aspects of this country and the rest of the world: banks, savings and loans, insurance companies, car financing, stocks and bonds, mergers and acquisitions. Department of Loan Sharks (credit cards).
When banks are allowed to borrow money by the federal government at .25%/year, as they are now, there is no reason to think any of that money will be loaned to Americans; or if it is loaned, it likely will be used to buy products manufactured in some other country since the American manufacturing has all been sent to third world countries. There is no reason to think banks will loan to U.S. businesses to expand their business here. Instead, U.S. businesses are mostly setting up shop in other countries and taking the jobs (and the tax base) with them. They are attracted to third world countries where they can hire 8 year old girls to do the work as slave labor. And our government not only lets them, it encourages the practice.
So the bottom line is that banks are no longer local or national, and when the federal government loans money to banks at .25%, most of that money is going right outside the country, further accelerating the transfer of wealth (and jobs) out of this country and into the hands of a small group of multinational elite.
Where did the billions of dollars in money that was given to the financial cartels go? Remember Paulson went to Congress and demanded a billion dollars, and Congress gave it to him. Where did that money go? When the banks were asked, when the financial cartels were asked what they did with the money, they refused to answer. How much of that money went directly overseas? These institutions are not investing in the U.S. -- they're looting it, and plan to be the last rats to jump before we sink.
The U.S. government borrows money from China at more than .25%/year, gives that money to the international financial cartels at .25%/year, and the U.S. people are obligated to pay the difference. We are losing money on this hacked interest rate no matter how you look at it.
Another problem with the U.S. government loaning money to the financial cartels at .25%/year interest is that the banks will not pay citizens more than that to "borrow" the citizens' money. In other words, when a citizen puts their money into the only secure place they can, which is a savings account or a CD, the bank is essentially borrowing that money, and agrees to pay interest on it. But the banks now will not pay citizens more than .2% interest/year, which means people have nowhere to put their money to safeguard it, and it is eaten away by inflation.
The effect of the slashing of interest rates on seniors has been particularly devastating. Most people retire with a home, maybe a pension and some social security, and some savings. They assume based on historical numbers that they can get 5%/year on their savings. Let's say they retire with $200,000 in savings, that means they can receive $10,000/year in interest without ever touching the principal. By slashing interest rates, Bush has stolen away the savings accounts of seniors all over the country, and created a situation which allows the financial cartels to move in with their predatory practices aimed at insecure senior citizens.
For example, when a senior receives no interest on their savings, they will begin spending the principal. When that gets down to a certain level they are consumed with panic, and some slick financial "advisor" will undoubtedly sell them on the idea of an annuity. A 20-year annuity which will pay the financial "advisor" a 10% commission. The seniors are told it is absolutely secure and guaranteed, and a great way to protect themselves. But the actuarial data show that few of these people will be able to leave that money tied up for 20 years, and when they need to take it out in an early withdrawal, the insurance company will keep half of the original investment as a "penalty."
Another con directed at seniors is the reverse mortgage by which some financial cartel will agree to pay grandma $2,000/month until she dies up to some maximum amount, and hope to take grandma's house, worth $250,000, for a meager advance of $50,000, and make a killing.
We sure have seen a lot of sentiment in recent years about the "Greatest" generation, and how grateful we are to them. But the fact is they've been robbed blind by this Bush regime and their corpses are being picked clean by the vultures from the financial cartels.
The effect of the slashed interest rates on real estate has likewise been devastating to the average working American since the cost of housing has radically increased beyond the means of most working people due to the reduction in interest rates. It does not help someone to pay three times what a house is worth just because they get a better interest rate. But that's another discussion.
The federal government has no money on its own. Everything it has belongs to the people. There is no benefit whatsoever to the American citizens to having our government loan money to multinational financial cartels for .25%/year. It needs to end. The federal government needs to break up these financial cartels, which have a monopoly stranglehold on this country. They also need to condition any loans to banks on the money being spent only here in the U.S.
And we need to get our government to stand up for working people and to punish any business that takes jobs out of the U.S. The only responsibility of the federal government is to protect the citizens. We need jobs. Any business that takes jobs out of the country should lose any right to operate or sell inside the U.S.