You nailed the point I think is the most critical: that artificially low interest rates (along with massive government debt) have resulted in an incredible misallocation of capital. Working in Silicon Valley I see (and benefit) from this first hand. Pensions, endowments, and all the other Limited Partners need 7-8% returns. Most directly access or are one to two steps removed from the free government money. With few “reasonable” investments that can return the required numbers, they are forced to chase returns. This leads to an abundance of capital in SV, one of the few places still believed to offer these returns (this is changing as this cycle comes to an end).

Others with first access to capital are doing great in this climate too: hedge funds, investment banks, government contractors, big companies. The rich get richer while the economy stagnates for the majority. Raising rates and stoping the bailouts of failed private institutions I believe will go a long way toward fixing this growing inequality. How we get leaders who can enact these policies is another thing since conventional wisdom (and much of academia) says dropping rates grows the economy. Amazes me that the world didn’t learn from Japan’s never ending stagnation. We hit the end of a 20 year credit expansion cycle in 2000 and there still is no will to let asset prices and credit deflate, instead we got the government “put” [1], not to mention the 2008 bailouts, and continued credit expansion.

The sad part is that instead of fixing the problem, micromanaged economic policy and money creation from on high, we will get jingoistic nationalism. While I do agree that some of our “free trade” has been anything but fair, the numbers, including those in the article, seem to indicate that it has helped large numbers of people throughout the world escape from poverty. I believe free and fair trade is a boon for all. These gains, unfortunately, will likely evaporate as fed-up, disenfranchised electorates in developed countries try anything to stop their slide backwards. It’s tough to sell a “help the world” argument to people who are hurting when those on the top are doing so well.

1. http://www.investopedia.com/terms/g/greenspanput.asp

Indeed. SV has become just another government program. The sad irony for me personally is that I long ago quit a job working for the government to come here.

This is an excellent comment. In summary:

1. The masses correctly perceive that they are being duped by people with first access to capital.

2. They elect/employ/contract other people who promise "ponies for everyone and a clean house" but instead mainly profit from first access to capital.

3. goto 1

There is no monopoly on the creation of currency in the US because it's not a business activity.

The Fed, though technically privately owned, is effectively independent.

Yes, it's basically insane that the Fed is not a nationalized entity, but at the same time ... not much would change if the government did nationalize it, I don't think, anyhow.

The power structure and decision making process would be the same.

The Fed is not technically privately owned. It derives its authority from Congress.

https://www.federalreserve.gov/faqs/about_14986.htm

When it makes a profit, it pays a little bit of it to member banks and the rest of it to the US Government.

I guess there aren't really laws about scrip in the US, but taxpayers know which money they like.

You are misled.

The Federal reserve is 'empowered to print money' by the Government, and is not really a profit-making entity - but it is privately owned.

It's a small detail, but an important one.

The banks of the USA each own shares in the Fed - it's privately owned.

By the way - American citizens don't have full control over it. There is no 'audit' or open books. Ron Paul demanded a historical audit of the Fed - and they would only go back as far as 2004.

I'm not a 'NWO conspiracist' - but the currency of the US is managed by private entities, under the oversight of Congress. If we could actually see what's on the books from 1913-2016 there would be many a skeleton.

Its organization is specified by statute:

https://en.wikipedia.org/wiki/Federal_Reserve_Act

If the banks owned it, they could vote to take all the profits (instead of a small fraction). Let me know when that happens.

"If the banks owned it, they could vote to take all the profits (instead of a small fraction). Let me know when that happens."

You are once again misled.

It's authorized by congress, but it is NOT A PART OF GOVERNMENT. Unlike in the UK, Canada - and everywhere else in the world, the US Fed is not a nationalized entity.

The Fed is literally owned by banks.

If you founded a bank in America, you would actually be forced to buy a share in it.

The banks don't 'vote to take all the profits' because the operating requirements are established by mandate from the government, and there is oversight. FYI the Fed does make a tiny profit.

And this from the US 9th circuit court:

"the United States Court of Appeals for the Ninth Circuit stated that: "The Reserve Banks are not federal instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned and locally controlled corporations."

Here it is from the Fed of St. Louis:

https://www.stlouisfed.org/in-plain-english/who-owns-the-fed...

"While the Board of Governors is an independent government agency, the Federal Reserve Banks are set up like private corporations. Member banks hold stock in the Federal Reserve Banks and earn dividends. Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also appoint six of the nine members of each Bank's board of directors. "

It is a highly controversial issue.

$100.2 billion tiny dollars in 2015. $97.7 billion of which was paid to US gov.

Holding this stock does not carry with it the control and financial interest given to holders of common stock in for-profit organizations. The stock may not be sold or pledged as collateral for loans. Member banks also appoint six of the nine members of each Bank's board of directors.

This is not ownership. It is membership. Membership that is required by law.

It's a privately held corporation, point blank.

It is not a nationalized entity, nor a part of government.

It's right there in writing.

There's also no reason that the US Fed should not be nationalized as it is in ever other nation.

But individual banks of no particular affiliation - just "bank" banks - can create all the "currency" you want to the limits of regulation. They're really creating abstract money that can be exchanged for currency.

The story of the Scots Free Banks being busted out by the Bank of England is poignant and interesting, but we simply don't know what would have happened had it gone the other way. The way we use banks now, having a bank go insolvent and all the depositors and other interested taking a haircut doesn't sound very appealing.

Non-monopoly currency is a pain in the neck.