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Irony of Modern day interest rates

                Most economists will agree that interest rates are set in a free market by “risk” calculations.  Simply put, the higher the risk of lending the money the higher the interest rate the borrower needs to pay.  This explains why someone with poor credit and a history of defaulting pays more than someone with good credit when borrowing capital.  In modern day banking, interest rates are set based on what the borrower can pay back without defaulting (currently 0.25%).  YUP, that is how STUPID our bankers have become!

                Yet, when the economy collapse one year ago banks who presented high risk and dismal balance sheets were given the lowest borrowing cost in the history of the US and additional trillions of dollars in new loans.  Instead of letting these ill managed companies fail, our so called “capitalist” system saved than and rewarded their over compensated incompetent executives with millions in bonuses.  The reason was because these banks were “too big to fail”.  Meaning that if they went under, it would have completely collapsed the banking system.  Just Bank of America alone would have emptied the FDIC and turn millions of Americans cashless.

                This interest rate irony is no laughing matter.  It is the clearest evidence of a broken economic system that is in the verge of collapse.  The lender who is desperate to get his money back lowers the cost to the borrower to a level that he/she/it can pay.

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