Irwin Kellner, the Chief Economist or Marketwatch came out with an article today parroting what we've been saying for the last year: the Fed is punishing savers to the benefit of borrowers. The mainstream press has sporadically written articles about this but it's good to see it continuing to get attention.
In his article he writes:
"It can't come a moment too soon for the silent majority -- the nation's savers.
In its efforts to shore up the banking system, the Fed has neglected the needs of those who save. And in case you did not know it, savers make up the bulk of the population."
But are savers the silent majority? When you add up everone who has a mortgage, credit card, car payment, home equity loan, business loan, etc. I find it hard to believe that there are more savers. We run on a credit economy, not a saver's economy. That's why the outcry over low interest rates hasn't been louder. There are a lot of people who have debt or use credit and they are all benefitting in the current environment.
I know that I am. I'm a saver but I also benefitted from low rates by refinancing my mortgage.
The other question to ask is, did the Fed have any choice? Shouldn't credit be less expensive in a financial meltdown? After all, it makes no sense to raise interest rates while the economy is crumbling. The Fed is not going to keep rates at 5%. Of course rates were going to come down.
But that doesn't make it an easy pill for those loving on a fixed-income to swallow.
What can a saver do? Get smart. Look for the very best places to put money. Don't let money sit in a savings account earning 0.5% when banks are offering 1.5%. Look for the very best CD rates. Shop around.
If all the talk about inflation is correct, then savers may soon see their fortunes reversed, as rates climb quickly.
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