Page 183 - TrumpsEconEra_Flat

Trump’s Economic Era

A deflationary period will keep interest rates low.
A negative interest rate would mean that you would
have to pay your bank interest on your savings.
Deflation and negative interest rates will act as a
deterrent to savings, which is the bedrock of growth.
Before the financial collapse of 2007-2008, few
economists would have suspected a relationship
between quantitative easing and deflation. A belief
among economists is that increased money supply will
cause inflation, not deflation. However, some
economists now recognize that quantitative easing can
lead to deflation. Because quantitative easing has kept
interest rates close to zero, banks have been reluctant to
lend money to the public where it could cause inflation.
Instead, banks have deposited money at the Federal
Reserve to earn interest, loaned it to foreigners, or made
speculative investments in the Derivatives Market.

Quantitative easing has encouraged an increase in
speculation as investors have fled the money market in
search of higher returns. Consequently, many of these
investments have increased in value—witness the stock
market in 2017. Quantitative easing has thus benefitted
the rich more than the poor.

According to the the Dodd-Frank Act of 2010, in
the event of an economic collapse, bank losses will be
refinanced by creditors. When you put money in a bank,
you become a creditor. As I mentioned above, in the
event of insolvency, big banks are to recapitalize
themselves with the savings of their creditors.

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