RUSH: Carl in Ireton, Ohio. It's great to have you with us. Hello, sir.
CALLER: It's a real treat and honor to talk to you, Rush.
RUSH: Thank you, sir.
CALLER: Second-time caller here. Hey, I want to get your take on something. In the late 1970s under Jimmy Carter, we had a horrible economy with sky-high interest rates.
CALLER: Today under Obama we've got an economy that's far, far worse, but the interest rates are extremely low. Can you explain, Rush, how this administration is holding down the interest rates and if you can, when do you think the interest rates are gonna skyrocket?
RUSH: I don't know that they will. The Federal Reserve is holding down interest rates. I know you're talking about interest rates, but concurrent with this is interest and inflation. And inflation is starting now. It has been for a while. They're telling us the cost of living is flat, but if you buy gasoline or food you know that they're lying to you about that. Inflation is going up. The Fed is keeping interest rates low as one of their so-called weapons in trying to force an economic recovery. The belief is, and this defies logic to me, but the professed belief is that businesses are not borrowing money because of interest rates and that banks are not lending money because of interest rates. So the Fed says if we keep interest rates low it will inspire small business to go out and borrow.
What small businesses have been saying for two years is it has nothing to do with it, we don't have any customers, we have no reason to expand, we've got no reason to borrow no matter what your interest rate is. The banks are saying we love this interest rate being low. We don't have to loan the money to make any money on it; we can put it somewhere with no interest rate, we can get it for nothing from the Fed, invest it in something else and grow it that way. We don't have to lend money to make money on it. Normally banks earn an income by loaning money to people. They pay it back with interest, and that's the bank's income. Well, with no interest, the banks can get that money from the Fed that they would otherwise loan and invest it in other places rather than individuals who want to borrow money. (interruption) No, it wouldn't stimulate the economy to raise interest rates right now.
But there's a dual-edged sword. They're not trying to stimulate; they're trying to make sure that the economy doesn't go off the cliff. But it's misguided, it's all based on a false belief that if interest rates were just lower that people would borrow money, particularly small business. You can hear Obama still talking, why do you think Obama's still out there promising tax credits, "If you go hire somebody, we'll give you a $3,000 tax credit for every new hire." Because businesses aren't growing, and they're not growing because there aren't any customers, and there are not any customers because unemployment is sky-high. So there's no reason to expand. They figured that they could get people to borrow money with low interest rates. And it hasn't worked out.
I don't want to gloss over this. All banks get their money from the Fed. And they're charged interest for that money. When that interest rate is hardly anything, the banks can get money for practically nothing. And instead of having to make money by lending it they simply go out and buy stock in Apple or whatever they do with it, and that's how they grow, they don't have to lend it. So nobody is lending money. The people that want to borrow are not considered good credit risks because of the state of the economy. So it's just mismanagement of the money supply and so forth by the Fed, as far as I'm concerned. And interest rates are totally at the purview now of the Fed. If the Fed wants to raise them they will.
It's good for people who can borrow. The mortgage interest rate's pretty low. But, on the other hand, people who live on fixed incomes off of their interest rates going high, they're sitting flatline, zero. Inflation doesn't have anything to do with the interest rate right now because they're two separate things. The interest rates is artificial. The interest rates being kept artificially low by the Fed as a weapon, as a piece of ammunition, really. Interest rates right now have really no relationship to inflation. If the Fed would delink interest rates to their control and let lending institutions set the rate based on what they thought they could get for it, if the market were allowed to rule, you might have some stabilizing in this, but none of that's gonna change really until there is some legitimate economic growth. And the policies that are in place here are stymieing economic growth.
This is the point that anybody who's paying any attention to understands. This administration is just a giant roadblock to growth, everything they've done. They're taking money out of the private sector and giving it to the public sector, unions, more bureaucracy, EPA, I don't care what agency you want to talk about, they're getting more money, and then the money that does end up back in the private sector ends up there in the form of food stamps or school dinners or more government services or what have you, health care benefits. But none of it the result of any economic activity that's creating growth and new revenue. The pie is not expanding right now. GDP they say is at 2.5%. We can look out and see that we don't have two and a half percent growth in the economy in the last quarter, there's no sign of it, other than in very small, unique sectors. But overall it just isn't happening.
The misery index with Carter did calculate, interest rates in some places got up as high as 15% back in the Jimmy Carter days. And it was just Fed policy back then not to monkey with it. These people, as far back as I can remember, the past ten years, the Fed has been paranoid about inflation. So they've kept interest rates low. What really has set in is deflation in some sectors, which is not good. You might think it's good for the consumer, but deflation for manufacturing is not good. If you can't recoup the cost of producing a product, then you can't stay in business, much less make a profit on it. And deflation makes it almost impossible to make back your costs on a product so there's deflation in certain parts of the economy, inflation in others. All the while they're trying to tell us that the cost of living index, CPI, is pretty much level. But it's not.
As I say if you buy gasoline or food, you know, the cost of living is getting more expensive. And now oil spiked up over a hundred bucks a barrel, what is it, 102 at the end of the day yesterday. So it's only gonna get worse. That's why this bunch, Obama and the Democrats have to go because all of this is by design, all of this is based on a mistaken economic belief that central planning and a giant central authority can create new products, dictate economic growth, target economic growth, and it cannot. This bunch has proven it time and time again with every stimulus, every policy. Just the other day the CBO guy admitted to Jeff Sessions, "Yeah, over ten years, the stimulus plan of 2009 will be a drag on economic growth. It will shrink the economy." Why is that? Why would a 700 or almost $850 billion stimulus shrink the economy over ten years? Because it can do nothing else. It takes that money out of the private sector.
Before you can spend $850 billion of the government you gotta take it out. It's a net wash. You take the money out of a collective number of pockets to equal $850 billion, and then you spend it again, you put it somewhere else in the economy? So we took it away from producers, and who ended up getting it? Unions, teachers, states, private sector. There was no infrastructure activity. There were no new schools built. There weren't any shovel-ready jobs. All of that was a lie, all of it was smoke and mirrors. The stimulus was a slush fund designed to keep union workers employed during the recession so that their dues were collected, so that Democrat campaign coffers were continually replenished. That's all it was. And the state of Wisconsin is proof of it. We cataloged it as it was happening in the state of the Wisconsin.