Bernanke to Spend Billions to Keep Interest Rate Low
The Federal Reserve decided yesterday to spend an additional $40 billion a month indefinitely to keep interest rate artistically low. The Fed pledged to keep interest rates low through at least the middle of 2014 and longer if necessary.
I watched Bernanke’s news conference after the announcement and he wanted to address the concern he is hearing that savers are being penalized by the artistically low interest rates. He basically said that yes it does hurt savers but in his opinion it was more important to help create jobs and support the financial markets.
Some critics say that this action takes from financially conservative investors and retirees and gives to those who take on risky assets like stocks. Some even think that the Fed is actually trying to force money out of savings with the low interest rates and into the stock market. Somehow that is supposed to be good, but for whom.
Certainly not good for those nearing retirement or already retired and wanted to keep their money safe while drawing a fair return in the form of interest income.
“Who would have thought that 5-year CD rates I bought a year ago at 2% would turn out to be a good deal. Savers are screwed, while the spenders will continue to thrive on free debt. At some point this will balance out, but time is slowly creeping away and I’ll likely be dead by the time it does.” Mark, retired.
Older Baby Boomers and Seniors are certainly upset that they are not getting any interest on their dwindling retirement saving; how many will have to put their saving at risk in this pumped up stock market or in an overheated bond market and maybe loose a big portion of their saving?
Senator Chambliss of Georgia’s office in DC called me to reply to this concern and said that the Federal Reserve is a private and independent and the Senator has no control or say so in this matter. Wow, that is scary. Senator Ron Paul seems to be the only one concerned about the effect that these manipulated low interest rates hurts those who saved for retirement while helping the banks and encouraging risky investments.
Well I don’t know the remedy to this dilemma we have of getting no interest on retirement savings. Some have moved their money to dividend paying stocks and municipal bonds to get a higher return, but at what risk?
Mark says in his quote above, at some point this will even out. When and how? In the meantime we wait.