Skip to comments.Low rates squeeze savers and may hold back economy
Posted on 08/25/2011 12:53:43 PM PDT by Hojczyk
Super-low interest rates haven't done what they usually do after a recession. They haven't ignited economic growth or revived the home market or persuaded consumers to spend freely again.
They have, though, caused misery for retirees and others who depend on interest income. Such income plummeted 27 percent from 2008 to last year.
Now, some economists worry that low rates might be hurting the economy itself -- defeating the purpose of the Federal Reserve's low-rate policies. When savers earn less, they spend less. And spending by individuals drives about 70 percent of the U.S. economy.
Those concerns arise 2 1/2 years after the Fed pushed short-term rates to near zero, part of an effort to combat the gravest recession since the 1930s. It's kept rates there since.
The Fed is "turning the faucet, and nothing's coming out," says William Ford, a former president of the Federal Reserve Bank of Atlanta. "I don't see any pluses on the plus side of the ledger ... But they're ignoring the strong negative effect that they're having. They're killing savers. Retirees are earning nothing on their life savings."
(Excerpt) Read more at finance.yahoo.com ...
“Any revolutionary change must be preceded by a passive, affirmative, non-challenging attitude toward change among the mass of our people. They must feel so frustrated, so defeated, so lost, so futureless in the prevailing system that they are willing to let go of the past and change the future. This acceptance is the reformation essential to any revolution.”
Nonsense. These low rates are great if you want to buy a house, car or other large purchase.If you really want to see the effect of low interest rates get them over to the credit card side of the economy. If consumers found that they could get 4-5% interest on their cards the economy would explode.
ObaMao's socialist policies are constantly changing the rules based on what seems to be politically expedient but in keeping with his ultraleftist idealogy.
Accordingly, few are willing to take any risk on hiring, investing or borrowing. That's the real issue. Recovery will begin only when the Prince of Fools and his Privy Council rubber stamps lose their jobs in sufficient number.
It is an illusion of income.
The problem is that risk never really goes away. Interest rates aren’t really that low. The costs for anyone to actually borrow remain, you just can’t find the money.
Rather then have the 0 percent, it would be better to just let the market set the price of borrowing.
When Obama and his czars impose regulation, strangling productivity, energy production, and innovation, why would you expect to make economic predictions, based upon interest rates?
Exactly! I have a couple of tons of bucks that return 2.8%, kind of limits my spending. If the rates were higher I would spend more not all boomers were spend thrifts.
Bernake will keep CD rates low so that people do one of three things:
1. Force people to buy stocks to inflate the stock market
2. Buy corporate debt, or preferably Government, debt
3. Buy stuff now (vs. saving it and having it get inflated away)
This is ALL on purpose!
If I had left it my savings account I would have earned ~$1.98. I'm retired (non Union non public employee non military) so I haven't felt the need or requirement to buy cars, houses, etc.
My SS check has had no COLA for a long long time. Saw tomatoes in the local grocery store yesterday for $5.99 lb. Is there a COLA for tomatoes?
Duke Power (DUK) is paying a 5.5% dividend yield. Just so ya know.
They are doing a reverse one for three split after they merge with Progress, my grandson should be safe.
I'm glad someone noticed but it's not just retirees earning nothing on savings. Mr. Ford.