By Jeffrey Tucker | Jan 30th, 2012
There is a scene in the Parable of the Talents in which the returned master berates the shabbiest of his three servants. Discovering that he had buried his seed capital in the ground, the master says: “You should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.” The servant is then thrown outside “into the darkness,” where he faces “weeping and gnashing of teeth.”
In today’s world, burying that money might have been the better idea. Otherwise, the servant would have paid fees for depositing, withdrawing and transferring and would have earned no interest at all, and the money would have depreciated in value the whole while. It’s enough to cause you to weep and gnash your teeth.
That parable has had a long life because earning interest on deposits is a universal feature of the human experience in any finance economy. Until now. The Fed has announced that it will work to keep interest rates at zero for the next several years, all with the supposed goal of refurbishing the economy. Or so Bernanke tells us at great length.
But here’s the problem: This very strategy of driving interest rates to zero has been a feature of the period in which the Fed has managed the post-meltdown world. The result has been what The Wall Street Journal accurately described as a five years of missing economic progress: The economy today is barely larger than it was at the end of 2007, despite a rising population and a gigantic explosion in technology. Household income is still sinking, and an entire generation has readjusted its expectations for the future.