Thoughts while pondering the 43 cents of
interest I earned on my savings.
A few days ago I received my monthly statement from
Fidelity Investments, where I keep some of my retirement savings.
It told me that the cash I keep in a money market account there is
earning an annual rate of interest of 0.01%. Yes, that is one
one-hundredth of one percent.
I have enough cash in that account to buy a fancy new car
or take a glorious long vacation but it earned me the grand sum of
43 cents in interest in the month of July. I might as well have the
cash buried in a coffee can in my back yard.
What this tells me is that our economic policy-makers in
Washington don’t give a damn about savers. The Federal Reserve is
holding short-term interest rates to near zero in a monetary policy
that could be reduced to a headline like one that became famous
back in the 1970s: FED TO SAVERS: DROP DEAD.
The Fed’s policy is geared to making unlimited amounts of
money available to banks and other lenders at almost no cost, to
encourage lending and to swell bank profits. It is doing a
marvelous job swelling big-bank profits and a lousy job of
increasing bank lending — both because banks are still leery of
taking on too much risk and because borrowers such as small
business are scared to death that the economy is about to swoon
again.
The current Fed policy fits nicely with the Obama
Administration’s aim to increase spending (both consumer and
Congressional) of all kinds — a policy which discourages any kind
of saving and applauds any kind of spending.
Even though overspending and easy lending led to a housing
bubble whose implosion triggered the 2008 financial crisis and the
resulting Great Depression, the Fed and the Administration are
desperately trying to pump up the real estate market with cheap
money and government guarantees on 90% of the mortgage loans made
in the U.S. today. Mortgage rates are at or near historic lows, and
housing prices are at their most affordable level in
years.
Yet none of this is working to revive the economy. Housing
is sinking again; in July, existing home sales fell 27%, far more
than expected. New unemployment claims are rising again, to nearly
500,000 a week, putting upward pressure on the nation’s 9.5%
jobless rate, and the stock market is signaling a strong chance of
a double-dip recession.
So the reward for all this brilliant policy making by the
Fed and the White House goes mainly to big banks and large
multinational corporations, whose profits are rising smartly. The
big-money interests are doing well, while about 17 percent of the
nation’s working people are either unemployed or under-employed,
and while retirees trying to live on their savings are seeing their
incomes decline and the value of their investments
shrink.
Obama’s big-spending stimulus plans clearly have failed to
revive the economy, and the Fed’s policy of printing money and
virtually giving it away have rewarded the wrong people and left
responsible folks — those who work, pay taxes, restrain their
spending and put away some savings — feeling like suckers being
conned in a political shell game.
Obama postures as the champion of ordinary people and the
bane of the “rich” but the outcomes of his policies suggest the
opposite is true. Under these policies, working people are
suffering, retirees living on fixed incomes are being punished,
small businesses are struggling to hang on, while big banks and
corporations are making out just fine.
The nation can little afford to maintain the
Obama-Bernanke economic policies of rising deficits, ballooning
national debt, unlimited money-printing, high unemployment and no
reward for saving or investing. It will end in something worse than
the 2008 collapse, unless Americans wake up in November and say:
“Enough!”
Only a two-by-four to the head of the Democratic Party’s
donkey will get their attention. It’s beginning to look like the
voters are reaching for the lumber.
