“‘If you invest your tuppence wisely in the bank, safe and sound, Soon that tuppence safely invested in the bank will compound, And you’ll achieve that sense of conquest as your affluence expands, In the hands of the directors who invest as propriety demands.’ – ‘Mary Poppins,’ 1964 – When ‘Mary Poppins’ was made into a movie in 1964, Mr. Banks’ advice to his son was sound. The banks were then paying more than 5% interest on deposits, enough to double young Michael’s investment every 14 years. Now, however, the average savings account pays only 0.10% annually – that’s one-tenth of 1% – and many of the country’s biggest banks pay less than that…That’s true for most of us, but banks themselves are earning 2.4% on their deposits at the Federal Reserve…That means we, the taxpayers, are paying $36 billion annually to private banks for the privilege of parking their excess reserves at one of the most secure banks in the world-parking them, rather than lending them out. The banks are getting these outsize returns while taking absolutely no risk, because the Fed, as ‘lender of last resort,’ cannot go bankrupt….The Fed, while declaring its ‘independence,’ is obviously not a neutral arbiter. It is working for the banks….A movement is also afoot to establish state- and city-owned banks that would have the ability to lend for infrastructure and other local needs. Local governments cannot get a risk-free 2.4% rate from the Fed for their demand deposits, but city- or state-owned banks could.”
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