Wednesday, July 06, 2016

Quantifying Easing...

Free Money !!
Limited Time Offer?
Wow, savings rates are really at rock bottom!  Who would have ever imagined that savers would be thrilled to earn just .01% on their share, money market or even certificate of deposit accounts?  Times sure have changed; just four or five years ago, savings rates were at 3.00, 4.00, or even 5.00%!

Pretty clear who is paying for this recession!  It's those folks who have been prudent and frugal with their finances!  Those folks who have saved their entire lives, while living "below their means" with a thrifty eye toward the future, the unexpected, and with the hopes of a comfortable retirement.
Boomers - Retirement Savings
 Going Up In Smoke ?

How do savers "pay for a recession"?  Thought everyone believed that lower loan rates were "the way forward"?  

Well maybe, but I doubt it - loan rates are at 70 year lows!!!  If I can't afford a mortgage at 4.00% is a 3.00% rate really going to make that much difference - nah!  Folks are struggling because of the lack of jobs (actually lack of good jobs) and stagnant wages, not because rates are too high! This observation appears not to have fully penetrated "The Beltway" as yet.

Rates Down... Fed Up !!
Most folks qualifying for today's lower loan rates are those who can handle the higher 4.00/5.00% rates, but are simply taking advantage of the "artificial bargain" being provided courtesy of  the Fed and its program of "quantitative easing"!  

Can't fault the individual mortgage "refinanciers"; it's kind of a "financial IQ" test - why should anyone want to pay more than "market" - artificial though it may be!? (But hope everybody has noticed this ain't a free market economy - right?) 

But, I digress; savers are financing the recession by accepting a rate of return on savings less than the inflation rate.  The official rate of inflation is somewhere between 1.00% and 2.00% in the U.S (the grocery store/gas pump rate is a whole lot higher!)   If the savings rate you earn is less than the inflation rate, your savings are losing value, losing purchasing power each year.

"Inflation" simply means it takes more and
Ease up !!!!

more dollars to buy less and less food, gas and other essentials each year.  Financially you're in reverse gear! Ms. Yellen and friends have forced market rates down by imposing a "wage cut" on savers - big time!  

Can get very, very scary if you are retired and counting on your savings!  You're basically on a "fixed income" (interest on your savings!) and you just took a tremendous "cut in pay" - from a 3.00/5.00% return a couple of years ago to .01% or less this year.  As a saver prices are heading up, your income is heading down! So, what's a saver to do???!!!

There is only one logical financially sound answer.....

Roll 'em! **

** "Thanks for the tip!"  
(You bet !)


Marvin Umholtz said...

Try Brexit...but where would you go? --Marvin U. 07/06/16

William Brooks said...

During the 100 plus years of the Federal Reserve, its track record of success has been dismal at best! Yet you and your big government friends seem to believe that this time they will get it correct?

Sort of like your misguided belief that the CFPB will help the consumer!

Anonymous said...

We need to make America great again!

Ben Rush said...

Temperate, sincere, and intelligent inquiry and discussion are only to be dreaded by the advocates of error. The truth need not fear them...
Benjamin Rush