(AP/Lukas Barth)

When nothing trickles down

The Fed's policy of keeping interest rates near zero can only benefit the richest 10 percent


Robert Reich
May 2, 2013 7:41PM (UTC)
This originally appeared on Robert Reich's blog.

The Fed’s policy of keeping interest rates near zero is another form of trickle-down economics.

For evidence, look no further than Apple’s decision to borrow a whopping $17 billion and turn it over to its investors in the form of dividends and stock buy-backs.

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Apple is already sitting on $145 billion. But with interest rates so low, it’s cheaper to borrow. This also lets Apple avoid U.S. taxes on its cash horde socked away overseas where taxes are lower.

Other big companies are doing much the same on a smaller scale.

Who gains from all this? The richest 10 percent of Americans who own 90 percent of all shares of stock.

But little or nothing is trickling down. The average American can’t borrow at nearly the low rates Apple or any other big company can. Most Americans no longer have a credit rating that allows them to borrow much of anything.

It would be one thing if Apple and other giant companies were borrowing in order to expand operations and create new jobs. But that’s not what’s going on. Apple, remember, is still sitting on $145 billion.

The reason big companies aren’t creating more jobs is consumers aren’t buying enough to justify the expansion. And government is cutting back on spending.

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Big corporations are borrowing simply in order to push stock prices up and reward their investors.

It’s a sump pump with the Fed on one end buying up bonds to keep interest rates low, and shareholders on the other end raking in the returns.

Get it? Easy money from the Fed can’t get the economy out of first gear when the rest of government is in reverse.

Trickle-down economics is the first cousin of austerity economics. Austerity is nuts when so many millions are out of work. And as we’ve learned before, trickle-down is a fraud. Nothing ever trickles down.


Robert Reich

Robert B. Reich is Chancellor's Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies. He served as Secretary of Labor in the Clinton administration, for which Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written 15 books, including the best sellers "Aftershock", "The Work of Nations," and"Beyond Outrage," and, his most recent, "The Common Good." He is also a founding editor of the American Prospect magazine, chairman of Common Cause, a member of the American Academy of Arts and Sciences, and co-creator of the award-winning documentary, "Inequality For All." He's also co-creator of the Netflix original documentary "Saving Capitalism."

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Apple Robertreich.org The Fed Trickle-down Economics U.s. Economy

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