NYT Op-Ed: Bernie Sanders: To Rein in Wall Street, Fix the Fed

I was pretty neutral about Sanders until I saw this article. I'll admit; I don't try to pay too much attention to campaign season until the end of the primaries because it's usually a gossip fest about people who won't even be on the Republican or Democratic ticket. This particular year has been crazy because of the incredible amount of viable candidates for the Republican nominee, so the Democrats have been mostly pushed to the background with only two major contenders. I know Clinton pretty well, both from her years as First Lady and the senator of my state, but I knew Sanders to be a socialist and that's about it. (And that tumblr would desperately like to suck his cock.)

This article is the moment I started to turn away from him, particularly these two lines:

Big bankers and their supporters in Congress have been telling us for years that runaway inflation is just around the corner. They have been dead wrong each time. Raising interest rates now is a disaster for small business owners who need loans to hire more workers and Americans who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until unemployment is lower than 4 percent. Raising rates must be done only as a last resort — not to fight phantom inflation.

Since 2008, the Fed has been paying financial institutions interest on excess reserves parked at the central bank — reserves that have grown to an unprecedented $2.4 trillion. That is insane. Instead of paying banks interest on these reserves, the Fed should charge them a fee that would be used to provide direct loans to small businesses.

Ron Paul's End the Fed — and you should be able to tell from the title he's no fan of it either — came out in 2009, right when the banking and mortgage crisis was really starting to pick up. A good portion of it is him railing against inflation and his freak out about what he was seeing around him at the time. The Fed can create money out of nowhere, which is one of its integral functions as a central bank. And it created a lot right when shit was hitting the fan back then to keep banks afloat. Like, trillions of dollars' worth as Sanders said above.

Although everything is fine at the moment, this is a disaster waiting to happen. If the banks start putting that money into the economy, then we would have rampant inflation, and this was what Paul was really worried about. So what can do you do stop this? The Fed can basically take all that money back, but doing that quickly would start making the banks rattle again, so it's gradually pulling it out over a period of years. In the meantime, to discourage them from using the money, the Fed is paying them to keep it in their vaults, kinda like a savings account; why spend it when you get interest?

Sanders is proposing literally the opposite of what you want to do in this situation. You do not want to push the banks to spend that money on loans for small business owners because that would unleash the deluge that we're all trying to prevent. That would fuck up not only the small business owners, but all of us. Should the Fed have made all that money back then? I don't know; I think we all panicked during that time and were trying everything to prevent a worldwide, financial meltdown. But the situation is what it is, and this is the best solution we've got. It's not really just considering the banks are ones who got us into this mess years ago, but I'd take them getting free money over my dollar being devalued.

I'll discuss Sanders' other points at another time.