[image: fbi.gov]

Robbing America—With and Without Guns

Notorious gangster Willy Sutton, when asked why he robbed banks, is reported to has said “Because that’s where the money is!” Although that statement was probably meant to show disdain for his captors, by today’s standards it is a gross understatement. Those same banks today are bulging at the seams with money, while those who are running the American banking system haven’t got the least concern for you or me or anyone except for those who can help them turn their substantial mountains of cash into the Himalayas, the Alps, and the Andes all rolled into one gigantic pile of moola without giving you so much as a wink or a nod.

How is all this happening?

The Federal Reserve Board is our central banker. They make money available to member banks so those banks can lend it to you and me and to businesses. When that money gets into circulation, it moves from consumers to businesses to employees, and back again in what is known as the “circular flow.” Every time cash changes hands it racks up one transaction. It turns out that every dollar in circulation “turns over” six times per year, thus every new dollar added to the circular flow generates $6 in new products or services. If the Fed should add $1 trillion to the pool, it would generate $6 trillion in GDP, $4 trillion in personal income, create 8 million new jobs, that would generate $2.4 trillion in new tax revenues to local, state, and national coffers. That’s how it’s supposed to work. The numbers are big but the concept is easy enough to understand.

But that is not happening now. Why not?

The reason is because banks can borrow that money from the Fed for the princely rate of just 0.75 percent per annum. Or they can borrow from each other for even less, at 0.25 percent. In practical terms, borrowing money for them is almost free. The Fed sets all those short-term rates. What’s more, the Fed has made $5 trillion available to banks since 2009, and they still have the spigots wide open and are filling up bank vaults with $85 billion per month.

Still, the economy has barely budged. A quick check of my math shows that $5 trillion in new money should have produced $30 trillion in new GDP, $25 trillion in new incomes, 300 million new jobs, and $12 trillion in new tax revenues. That’s enough stimulus to restart North and South America, all of Europe, and a big chunk of the Far East. But none of that has happened.

Why not?

The reason is because only $1 trillion of that new money has gotten into circulation. That increased the money supply by 33 percent. But during recessions, consumers tend to save rather than spend, so the net effect on the economy has been very small. We’ve only added about 8 million new jobs.

The other $4 trillion has gone into the bankers’ playgrounds—into those places and activities that moved them from merely being rich to a new level in which they are rich beyond all reason, beyond your wildest imaginations, and even beyond theirs. Instead of lending money to the little guy—the consumer who buys things and creates profits and wealth—they are putting that money in places where they can make huge profits; namely, in the stock market. It’s free money and buying stocks is way more profitable than lending money to Joe Sixpack. Have you noticed what has happened to the value of stocks in the past 4 years? They are up on the order of 170 percent! America’s wealth has increased by $20 trillion dollars. And 95 percent of that wealth has gone into the balance sheets and the pockets of bankers and their friends—the other rich boys.

Meanwhile, the Fed is still pumping money into those corporate bank vaults, while Joe Sixpack and 150 million more like him haven’t got a clue about this biggest heist in human history. And the new Fed chairperson, Janet Yellen, has already declared that she is going to continue filling the corporate bank vaults until they overflow into the streets.

That’s bad news.

What is needed is this: 1. End the Fed’s “quantitative easing” and stop lending corporate banks $85 billion per month. 2. Instead, lend that same amount to smaller community banks, credit unions, the Small Business Administration, and to Fannie Mae and Freddie Mac for ordinary loans to ordinary people making $40,000 to $150,000. Consumers account for 70 percent of GDP, and small businesses account for 75 percent of all new hiring. Together, these two groups comprise the engine that pulls the great American economy.

The other solution is this: Bring back Willy Sutton!