Dear Fed: Why do you hate us (and other savers) so much?

This is a serious post. Probably the most serious I’ll post all year.

My wife and I did what we were told we should do. We saved our money. We lived less considerably below our means so that we could save our money.

Now we’re retired (somewhat earlier than planned, through no fault of our own, but never mind…)

And now the Fed is essentially saying “Screw you. We hate savers. You are required to invest and borrow. Saving is for idiots.”

Which is to say: We can’t get decent rates on CDs or other guaranteed savings–because the Fed plans to keep interest rates at essentially zero for what sounds like pretty much forever.

Would we be happy to get interest rates equal to inflation? Not really–but I don’t even believe we can count on doing that at this point.

We don’t much like risk. We spent less money–a lot less money–so we wouldn’t have to cope with risk.

That apparently offends the Fed.

As far as I can tell, the methodology being used by the Fed basically enriches Wall Street, as it forces more people to invest regardless. It’s doing a pretty good job for bankers, too. Basically, those who were already getting richer are getting even richer.

I don’t believe it’s bringing lots of people back to work. Companies that can borrow at no interest seem to keep enriching their owners, managers and shareholders, and hiring the absolute minimum number of workers they can. (If zero-interest loans were only for small businesses, which create most new jobs, that would be different.)

But for us and, I believe, a few millions or tens of millions of other people, it looks like direct punishment for not being massively in debt and for not being gamblers: Making sure that we can’t earn decent return on savings.

And I think it stinks.

I forgot to add this crucial point:

If we could get decent rates on savings, we’d spend more.

As it is, fear of long-term major issues and knowledge that we’re getting crap on our savings–and that it’s likely to get worse, not better–is keeping our optional spending lower than it should be.

4 Responses to “Dear Fed: Why do you hate us (and other savers) so much?”

  1. ksol Says:

    Walt – we’re in the same boat. For years we’ve lived below our means so that we can manage an emergency. We’ve bought smaller to mid-sized used cars and less house than we can afford. We’re rewarded with 2% interest rates on 5-year CDs for that. Would I do it the same way? Yes. I think many people believe debt gives them freedom to get what they want. Our attitude is that debt pins us down through obligation to service. So we’ll definitely continue that strategy, but it is irritating — especially when I’m supposed to be sympathetic to people in the news who overbought and over-borrowed and are now in trouble and need help. I’m not thinking of the people with medical emergencies and the like that took them down. More like the story I saw on the family that took out a home-equity line to take their kids to Disneyworld or the financial writer who bought a half-million dollar house on an income about a tenth of that.

  2. ksol Says:

    Whoops. Obligation to service that debt. Missed a word there… need more coffee.

  3. Walt Crawford Says:

    ksol: Where do you get 2% on 5-year CDs? The best we can seem to do these days is 1.9% on 10-year CDs…

    Yes, we’re delighted to be debt-free (actually, we’ve always owned Honda Civics–now one Honda Civic–and until we moved to Livermore we always lived in starter houses, to the dismay of our realtors)…but without steady (or, given my startling book sales lately, any) income, we find the “you’re not supposed to save” Fed stance particularly threatening.

    The possibility of a medical situation at some point in the future–the kind that drains assets over several years rather than the kind likely to be covered by Medicare or health insurance–is part of the problem.

  4. ksol Says:

    Well we were getting 2% the last time we took any CDs out, but it looks like rates have dropped since then, so if I took out one today I’d get nowhere near that. We’ve done better at credit unions than at banks, but still, interest rates are pretty pathetic right now.

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