Low rates squeeze savers and may hold back economy

[CountAllVotes]

Source: Associated Press

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.

<snip>
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."

:dunce: :dunce: :dunce: (one for each of the idiots involved ... I need a million more of these however) ... :dunce:



Read more: http://www.chicagotribune.com/business/breaking/chi-low-rates-squeeze-savers-and-may-hold-back-economy-20110826,0,5228280.story?track=rss

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Gee, they are just now figuring this out? Many people don't invest in Wall Street (I am one of them) and the CDs that are expiring Sept. 1st (paying 6%) can be renewed at 2.32% at best.

Many are not spending a damn dime extra on anything as it is not affordable for them, especially if they are trying to live on fixed incomes and/or are retired.

Figure it out genius Bernanke, when the commoners don't spend because they aren't getting anything for what savings they might have left, the sign OUT OF BUSINESS begins to appears on doorways throughout the land.

Stupid is as stupid does ... :grr:

[Cali_Democrat]

1. Very interesting article!!

The Fed's strategy of punishing savers by keeping interest rates low and buying Treasury bonds has failed spectacularly.

These guys at the Fed enact certain policies and watch them fail, yet they keep on sticking with the same failed strategies.

WTF is wrong with these people?

[CountAllVotes]

2. pretty simple if you ask me

:dunce: says it all IMO. :argh:

:dem: :kick:

[Yavin4]

15. You Can Get 2.3%??? Lucky You.

My bank, Chase, is offering two CDs. One is for two years at the fantastic rate of .50%. Another one they offered is at 7 years for a whopping 2.00% Gee, I wonder how much gas will cost in 7 years?

[aggiesal]

3. I think this is because ...

nobody has any extra money.

I appreciate my low interest loan, and it allows me to own my home.
But there is not much money left over at the end of the month to
treat myself or my family to anything. Movies are the easiest, but
we stick to rentals. I love baseball, but I haven't attended 1 game
because 1 ticket is way too expensive for decent seats.

Until there is more expendable money in the middle class, I don't
expect the economic growth to change.

The expendable money spent by the Greedy-One-Percent (GOP) at the
Neiman-Marcus's and Tiffany's is simply not enough to make the
economy hum like we expect.

[Devil_Fish]

5. I hate to break it to you, but the bank owns your house. NT

[aggiesal]

6. Your not breaking any news. ...

Of course the bank owns the house.
It's just a figure of speech.

When you take out any loan, you're asked "Do you own or rent?"

[walerosco]

4. good thing we can save our

money in something other than the US dollars. NZ dollar? swiss franc? or even gold/silver?

[Yavin4]

7. Gold and Silver

That's the ticket.

[Po_d Mainiac]

8. Know of anything else that's done better

YTD, YoY, since 2006?

[Yavin4]

9. Nope. n/t

[Po_d Mainiac]

11. What's worse thing is

I fail to see anything else holding up looking 12months forward.

There were two groups of Germans that didn't get wiped out by the Wiemar printing press. There were those that had assets which could easily be converted in Pound Sterling or Swiss Francs. And then there were those enlightened few with a hoard of wheel-barrows.

[wishlist]

10. In my city, highest CD rate (5 yr term) has dropped to 1.9 this week

I renewed two CD's this summer and and got 2.4% for 5 yr CD's. But I checked today and found that those 2 banks are now only offering .9% and 1.5% for a 5 yr CD!! Another bank in town has 1.9% as its highest rate. This is getting ridiculous. Online banks can be a hassle and most aren't over 1.5 to 2 anyway. Thankfully I still have some savings bonds and older CDS locked in at 5% for a couple more years. I just refuse to gamble with my hard earned money at my age in retirement.

Although I didn't lose anything in stocks and am already retired with a decent pension and bought some silver and gold years ago, I still feel the need to economize on spending and reduce my charitable contributions due to my shrinking interest income.

[OllieLotte]

12. Sometimes the safe play isn't the usual, conservative stodgy CD or bond.

It is certainly a challenging environment... on that we can all pretty much agree.

[AdHocSolver]

13. Low interest rates for savers accomplished their purpose very well.

Low interest rates for savers had two purposes, neither of which was to spur economic activity.

One purpose of low interest rates was to "encourage" people to gamble in the stock market since you "couldn't make any money by putting your savings in a bank account".

The second purpose was to maintain a large spread between what a bank charged its customers for loans, and what it paid depositors for use of their money.

An 8 percent mortgage interest rate may sound low, but when the bank is paying its depositors 0.2 percent interest on that money, the bank is making a 4000 percent return on the loan. The bank is essentially using your savings for free.

When the bank charges 16 percent on a credit card balance, it is making 80 times its cost for using your savings.

It was Keynes, if I remember correctly, who pointed out during the Great Depression, that no matter how low the interest rates go, if large numbers of people are unemployed, nobody is going to lend them money anyway.

The Federal Reserve is essentially a consortium of banks whose primary function is to work for the benefit of the banks and Wall Street. The recent huge transfer of the assets of the middle class to the super wealthy, and the bank and corporate bailouts aided by the Fed shows that they have been eminently successful in their primary function.

The new money making opportunities in China and India, among other places, indicate that the banks and multinational corporations have little to gain by revitalizing the U.S. economy. Cheap labor and an increasing middle class in those countries make the American middle class unnecessary in Wall Street's profit expectations.

Current corporate goals are, for example, to gain access to tar sands oil to export to China. (Of course, they tell Americans that tar sands oil will reduce American dependence on foreign oil.)

There is only one way to revive the U.S. economy and that is to bring jobs, especially manufacturing jobs, back to the U.S. The biggest drag on the U.S. economy is not the Federal deficit, but the trade deficit.

The best way to reduce the trade deficit and bring back jobs is to get rid of corporate control of trade through NAFTA, the WTO, the IMF, and replace the Fed with a true national bank, not this corporate controlled aberration.

[Po_d Mainiac]

14. +++++