I’ve said it, and you don’t listen to me… so how about when a former Harvard economics professor says it, on PBS?
Before I explain, let me disclose that I have been a stopped clock of criticism of the Federal Reserve for half a decade. That’s because I believe that when the Fed intervenes in markets, it has two effects — both negative. First, it decreases overall wealth by distorting markets and causing bad investment decisions. Second, the members of the Fed become reverse Robin Hoods as they take from the poor (and unsophisticated) investors and give to the rich (and politically connected). These effects have been noticed; a Gallup poll taken in the last few days reports that only the richest Americans support the Fed.
Oh, and he also just pulled his money out of Bank of America, because he says it’s not safe there.
Last week I had over $1,000,000 in a checking account at Bank of America. Next week, I will have $10,000.
Why am I getting in line to take my money out of Bank of America? Because of Ben Bernanke and Janet Yellen, who officially begins her term as chairwoman on Feb. 1.
Why do I risk starting a run on Bank of America by withdrawing my money and presuming that many fellow depositors will read this and rush to withdraw too? Because they pay me zero interest. Thus, even an infinitesimal chance Bank of America will not repay me in full, whenever I ask, switches the cost-benefit conclusion from stay to flee.
Let me explain: Currently, I receive zero dollars in interest on my $1,000,000. The reason I had the money in Bank of America was to keep it safe. However, the potential cost to keeping my money in Bank of America is that the bank may be unwilling or unable to return my money.
I believe this is a fabulous article—truly fabulous—for painting the big picture of how the Fed has distorted markets and penalized all but the richest of the rich (Gee, an organization run by the richest in the world actually benefits them and their peers the most? Who would have guessed?!?), and also by walking us through the risk-reward calculation on leaving money in a bank. Great article.
But… hey, the Super Bowl is Sunday, and Justin Bieber got detained at Teeterboro Airport on his way to the game, what do you think of that?