Skip to comments.The Vanishing Middle Class And The Fed's War on Savers
Posted on 03/14/2013 12:07:20 PM PDT by whitedog57
The good news: Initial jobless claims declined to 332,000 for the most recent week ending March 9. The expectations were for an increase to 350,000.
The bad news: Initial jobless claims are back to where we were in March 2012.
Remember, there are still 12,032,000 unemployment people in the USA. And we are back to the peak of the Carter-era recession.
Continuing jobless claims fell as well. But this time it is back to the end of March 2012 levels.
In terms of occupational growth rates, mid-wage growth remains negative leaving growth in only high-wage and low-wage occupations. Ah, the vanishing middle class.
Is The Federal Reserve helping to fix this gap? Well, The Fed is indicating that they will keep interest rate low even once their benchmark goal of 6.5% is reached.
Here is a chart of the yield curve for today compared with the beginning of QE1 on November 3, 2008. For the 10 year Treasury, The Fed has helped lower the rate by just under 200 basis points.
Even worse, the short-rate have plunged to near zero (and a negative real rate). This punishes savers and Seniors. And The Feds Balance Sheet continues to mushroom.
I dont see how simply pushing down interest rates will solve the structural employment issues in the USA, such as an evaporating middle class. Lets see. The MORE government spends, the lower the wages and salaries of Americans (as a % of GDP) become.
My 5 year CD went from over 5% to 3.88% and is currently at 1.39%. I am just going to pay down the mortgage with it. Rates are ridiculously low, especially with all of the inflation that the Fed conveniently ignores.
No questions. They want us to be poor and dependent on the government.
I posted this on another thread and thought it may provide a broader perspective on the current situation.
My thoughts, for what it is worth.
There is an interesting dynamic that would need to play out before we see a collapse. Not just a market crash, but social collapse.
Heres the issue:
Virtually all commodities are traded in US Dollars. This means that Foreign countries need to convert their currency to US Dollars to buy, mainly food and energy, even if those commodities are bought from another country. What that country does with those US Dollars is up to them. They can use them to buy the commodities they need or simply hold them.
The FED prints dollars and that makes the US Dollar less valuable, basically it doesnt buy as much stuff. This is inflation. So, countries that have a currency linked to the US Dollar experience a reduction in their purchasing power, the non-US currencies see an increase in their buying power.
When and as the FED has been printing or doing QE 1, 2, and twist, it has hurt the US Dollar and has created a creeping inflation for us. At the same time it has made US Dollar denominated assets very attractive to foreign buyers. Which in turn provides support for the US Dollar. We destroy our Dollar and sell more of our stuff, including hard assets in the US.
At present, virtually all central banks around the world are trying to De-Value their currency in order to increase their exports. The FED is keeping pace with them in this race to the bottom. This cycle of QE * has been going on for 4 years now and could continue for quite some time. I believe it is being coordinated with all G-8 countries. I also believe they are doing this because it is the only option available while they wait for the latest greatest next best thing to revolutionize the current system. The next bubble.
So, keeping in mind that a weaker US Dollar tends to self correct as a natural function of our globalized markets, what would cause this function to breakdown?
First of all, I hope readers can see how a One World currency would be a disaster since it would remove the self-correcting function when imbalances occurred.
What would cause the US Dollar to collapse in a non-orderly fashion, in a way that would break these cycles we are experiencing?
Consider that the entire system is built on confidence, and with globalization, its a kind of cooperative confidence that keeps the balance. As a result, it seems that central banks around the world will continue to play the game as long as they can. BTW, I believe the FED has some very smart folks working there and are fully aware of this.
So, a scenario in which an unforeseen event would cause a primary country to adopt out of this game, would be the likely trigger. I can see another event similar to the Long Term Capital failure that happened in the late 1990s being a very strong possibility. The failure of a major Bank/Investment Company, that would break the system would more than likely come out of Japan or China. It would be worse if it came out of Japan, since their Central bank is operating on a knifes edge.
What would need to happen is for a G-7/8 country to basically say to the rest of the world We are out, We fold and to take their chips with a renewed sense of nationalism in an effort to restart on their own.
I can envision this nationalism coming from either Japan or Germany at present, however China can be the wild card here. China is still communist after all, and if they decide to tip the balance, they certainly could. They would, once again, have to starve their own people in the process.
And the game continues.
You’re lucky to get 3.88 on your CD. My bank will be offering 00.1 or so. And want me to take out an annuity which will pay slightly more, but I refuse because the “salesman” at the bank will benefit in his pay check if I do, and annuities are always subject to losses no matter what they tell you. Also, an annuity is NOT covered by the FDIC, but by another insurance company.
That happened about twenty years ago, and the ins. company insuring the annuity bent bankrupt leaving the holders out of luck.
Bank CD’s suck. They have always sucked compared to your alternatives.
The bank makes the spread whether a salesman or teller places your order.
You can buy what the Bank buys and keep that spread. And depending on how much money you are working with, you could more than likely generate a virtually risk-less return between 5 and 10%.
You just need to know the rules and have to get slightly pro-active. I’m not talking about trading everyday or week, but maybe once a month, having to make a decision.
If you are indigent, you get it free. If you are solvent, you pay through the nose until you are no longer solvent.
What are the rules?
Thanks for your reply. Now, I ask the same question as E Pluribus Unam. What are the rules?
Conservatives will be fighting a losing battle on all fronts, including cultural, until we finally learn how to control or eliminate the FED.
A country’s monetary system is the basis of society - even more so than food.
The FED is the enabler of big Gov’t and the nanny-state. Eliminate the FED and you eliminate 1000 other things conservatives are battling against, from Planned Parenthood to PBS.
Don’t save cash. Save lead, brass, and blued steel.
There are a number of factors involved before anybody would suggest you take a seat at the table.
This is where a competent Financial Adviser earns their money. That being said, there is no reason why you can't do this yourself.
I'm not a Financial Adviser, however I've spent the better part of the last 25 years in the business.
For the most part, it comes down to suitability and the amount of capital you are working with.
If you've got less than $50,000, and depending on other factors, it's not likely to be a viable alternative.
Other factors include:
Working currently and retirement expectations
Current and future liabilities
Net worth and Liquid Net Worth
Given the above, there may be an alternative for someone that is willing to spend about 3-4 hours a month in order to get a better return.
Listen, I'm not selling anything here and would only be interested in providing information or education to those that have both the need and capacity to exercise their options.
What’s a spread?
What are the rules?
The spread is the difference between what the banks pays you and what the bank gets.
They certainly don't put your money in a drawer waiting for you to ask for it.
They take your money and buy stuff that pays them for the trouble.
But they need to make a profit in the process.
You can either buy what they buy (depending on how much money you have) or you can look at alternatives.
Well said. Absolutely!
Democrats purchased the 2012 election by creating Baraqqi/Bernanke/Geithner electronic money and paying it out in entitlements.
The fedgov is like the family in 2007 riding a wave of false prosperity based on maxxed out credit cards and helocs on a house with negative equity. Instead of two leased SUVs and a McMansion, it's entitlements.
This generational theft from elderly savers will also affect their children when they find out they are inheriting nothing from their parents...and their parents have had to take out a reverse mortgage on their home so the government owns that too, when they die. After a lifetime of working, there will be nothing left for the next generation.
From what I have read, it’s been mostly the kids that have recommended reverse mortgages to their parents knowing full well that it will eat into their equity and inheritance.
I learn something every day.
The 3.88% was 5 years ago. My CD expires on Sunday. The current rate will be 1.39. I believe regular savings is .15% now. These are credit union rates.
I worry less about the generational theft from the elderly than the reverse....the generational theft from the young....they’re the ones getting totally screwed...
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