Thursday, February 05, 2015

I give up.

I'm a girl, but it really frustrates me to see girls be as completely stupid as this chick Lauren Winsor from HuffPo. Article here.

She's complaining about Ben Carson's comment that when interest rates are at next to zero, banks have no motivation to lend to people.

Wait for it people.... because this is her reply.

"Actually, the opposite is true -- when interest rates are near zero, banks are able to get money from the Fed for nearly free, thus increasing their profit margins when they then loan that money to consumers or small businesses at a much higher rate. The more likely reasons banks are not lending to small businesses are tightened credit standards, reserve ratio requirements, and the opportunity cost to banks, which can make more profit off speculative bets."

First of all, the Fed is the lender of last resort. The fact that banks are getting money from the Fed rather than each other means banks don't trust each other. If banks will not lend to each other(which is what happens in a normal world), by definition they are probably not in a hurry to lend to individuals or businesses. If banks made enough money on the interest they made - THEY WOULDN'T HAVE TO GET MONEY FROM THE FED. They would feel secure enough that another bank actually had the funds to lend. See that circular logic?

Second, the money gotten from the FED is not free! The Fed has to print treasuries "to make all that free money" creating an actual asset to be lent against. You think the banks just stroll up and say give me some free money? And poof. Money in the bank?

One day this money will need to be payed back and I hope this ruins all of this girls future dreams. Really, I just hope her life turns to shit.

The audacity of her parting comment is just well.... crazy considering.

"It is indeed true that lending to small businesses has not recovered since the meltdown, but it's not because interest rates are too low... Maybe Ben Carson should stick to medicine."

No comments: