Standing on our heads

The world of money and banking is on its head.  In some places, putting money in the bank will cost you money, as the bank is charging negative interest rates.  This is completely the opposite of centuries of experience, a foray into unknown territory.  People in the United States have had a negative savings rate for decades.  This forced banks to appeal to investors to get money to loan out.  People have been encouraged to use credit to continue consuming, so that the economy would stay positive.  But the average wage earner is not making enough to be able to keep on borrowing, and economic activity is languishing.  Negative interest rates are a method of trying to force people to invest money rather than saving it.

The system is telling us that things are not working.  People are not making enough money to keep the economy going.  Minimum wage laws will not help this situation, as they force prices to rise.  But increasing wages for most workers would improve the economy, if the additional compensation came out of the exorbitant earnings of executives and dividends paid to shareholders.  Income inequality is driving the monetary system of the world into chaos, as the majority of people are losing the ability to buy anything beyond minimal survival needs.  When all the money is in the hands of a few, the system stops working.  That is the drawback of capitalism, which we are experiencing today.


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