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.