Mark W. Hendrickson

Government and its central bank have suppressed demand for capital in several ways:

First, the torrent of anti-wealth policies unleashed by the Obama administration have produced the “turtle phenomenon”—many businesses have gone into shells, postponing plans to open or expand until the cloud of uncertainty and fear of arbitrary wealth-destroying policies blow over.

Second, the Fed has been paying interest (albeit a modest .25 percent) on banks’ excess reserves, and that has reduced the incentive for banks to lend those funds.

Third, there is abundant anecdotal evidence that banks have been rationing credit so severely that even low-risk customers often are denied loans.

American savers are taking it on the chin. With interest rates on Treasury debt being ultra-low, when you factor in inflation and taxes, savers are paying the Treasury to hold their money instead of earning a positive and market rate of interest. By creating artificially low interest rates, the federal government benefits by making artificially low interest payments on its massive amount of debt. In effect, ZIRP is bailing out our bankrupt government at savers’ expense. This is one way that wealth is being “spread around” in the age of Obama.

By ZIRPing us unrelentingly, the Fed is proving that it is no friend of the people. To paraphrase the Gettysburg Address, the Fed is a tool “of the [government], by the [government], for the [government].” One is tempted to add: [May it soon] “perish from the earth.”


Mark W. Hendrickson

Dr. Mark W. Hendrickson is an adjunct faculty member, economist, and fellow for economic and social policy with The Center for Vision & Values at Grove City College.