Dedicated to Deposits: Deals, Data, and Discussion
Featured Savings Rates
Featured Accounts

Shut Up, Savers!

Saturday, May 18, 2013 - 5:11 PM
"Only an estimated seven per cent of all financial assets nationally are directly held in interest-bearing assets (like CDs or savings bonds). Even seniors, one of the groups most obviously hurt by low interest rates, get only ten per cent of their income from interest payments. Bernanke has been accused of waging class warfare and forcing senior citizens to eat cat food, but the simple fact is that people who are net savers are, on average, wealthier than those who aren’t. Currently, the big risk isn’t that the Fed will wait too long to raise interest rates; it’s that pressure from savers will cause it to raise them prematurely."

James Surowiecki: The “War on Savers” Myth : The New Yorker
7
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
1. Saturday, May 18, 2013 - 6:17 PM
This is a good reminder that the Fed Chairman could be much more of an inflation dove than Bernanke. From the article:
And a new research paper from the New York Fed suggests that we should have aimed at a higher rate of inflation, which would have stimulated spending and investment by making it less attractive to just park money in the bank. Bernanke’s critics like to point to the still weak job market as evidence that the Fed’s policy hasn’t worked. It’s far more likely evidence that the Fed hasn’t gone far enough.

Let's hope the Fed doesn't go down the path of aiming at a higher rate of inflation.
7
Ken TuminKen Tumin5,468 posts since
Nov 29, 2009
Rep Points: 125,029
2. Saturday, May 18, 2013 - 6:33 PM
I just post 'em Ken. I stumbled across this article in The New Yorker and wondered why it didn't get much play on financial blogs when it it was first published.
5
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
3. Saturday, May 18, 2013 - 8:02 PM
So if we Savers have to "Shut UP" then people like Ken who spend so much time and effort trying to help us get those 2% CDs should just close up shop and let us fend for ourselves.  Cash Cow should become Grass Cow and not post rates either etc. etc.  I come from a time when you were not considered the bad guy if you saved and frankly I am tired of articles making us now  responsible for all the terrible things that will happen if Savers actually can convince the Fed to let us get even 2 or 2.5% on a 5 year CD!  I am not fighting for 5% CDs.  I know what a wreck that can make of our economy now that the Fed has put us on the road we are on.  However, I do think they can find a happy medium and find a way to raise rates even a bit for Savers yet still be able to keep our economy from crashing.

  I assure you if articles like this do get much play on financial blogs, I will not "shut up".   Savers are not the reason our economy is in the mess it is in and I won't sit back and allow people who want to make excuses for those who did put us in this mess make Savers the "culprits".

Shorebreak:  I am not trying to "shoot the messenger" here.  I thank you for posting the article and helping us become aware of what is going on in the background. 
4
paoli2paoli21,367 posts since
Aug 10, 2011
Rep Points: 5,992
4. Saturday, May 18, 2013 - 8:47 PM
.

Dear Readers,

Wow ... such a post from none other than "Shorebreak"  ... Amazing ...  the Sun has risen from the west today !!! :-)

 
No wonder people with lots of savings want the Fed to start tightening—to stop buying bonds, and to raise interest rates. But most Americans depend on wages and salaries for their livelihood, not on interest income, and higher interest rates would hurt the job market, which is still weak, with unemployment near eight per cent and wages barely rising. Also, most Americans have more debt than savings, which means that they benefit directly from lower interest rates.

Indeed ... And to add to this, I must point out that FED is legally required to help the un-employed, as the first half of the dual mandate.  They have no responsibility, mandate, requirement whatsover to help the (so called) savers one bit. 

Those (so called) savers who expect FEDs to help them perhaps need to do their panhandling with a different organization!  :-)

 
The war-on-savers crowd makes Bernanke out to be a wild-eyed ideologue, willfully risking hyperinflation and sacrificing the well-being of retirees to his reckless schemes. But, if you look at the U.S. economy, you don’t see any of the signs you’d expect if the Fed were acting recklessly: the money supply is not growing rapidly, and inflation is trivially low.

But of course inflation is trivially low!  And that addresses the second half of the dual mandate. 

I completely agree: Shut Up, Savers!  :-)  ...

... Or maybe since you - the savers - despite being an insignificant minority - do have the constitutional right to speak ... Keep crowing, Savers!  :-)

Yours Truly,
- Anon
In FED I Trust  :-)

.
3
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
5. Saturday, May 18, 2013 - 9:27 PM
On the other hand...

"banks pay virtually nothing to depositors for the use of their money, and they turn around and lend out those deposits at wide spreads. It all adds up to an industry that pays close to nothing for its raw material -- cash -- and has the Fed’s blessing to rake in the profits. Bernanke is the single most dangerous man ever to occupy high office in U.S. history, it is terrible what the Fed is doing.”

"I don’t know which is sadder: That the Fed’s low interest- rate, easy-money policies are literally creating the next financial bubble right in front of our eyes, or that Krugman, supposedly one of our greatest economic minds, can’t see it, even though the very same thing happened just eight years ago and led to the Great Recession of 2008. Either way, I agree with Stockman. We’re in for trouble, and sooner than we care to admit."

Cohan: Fed Is the Villain in Krugman-Stockman Brawl

Stockman KO’s Krugman in Big Fed Brawl - Bloomberg
7
ShorebreakShorebreak2,603 posts since
Apr 6, 2010
Rep Points: 14,091
6. Saturday, May 18, 2013 - 9:46 PM
.

Dear Readers,

Err ... No ... The Sun didn't rise from the West afterall.  :-)

 
Zero interest rates are basically crucifying the savers of America on a cross of ZIRP as I call it,” Stockman said, referring to zero-interest-rate policy

... So? .. So what? ... Why should the FEDs care? 

If "sacrificing" the (so called) savers is necessary to help un-employed Americans find jobs, and to keep inflation low, then FEDs have the dual mandate (hammer and nails?) to carry out this sacrifice!  :-)

In any case as pointed out in the first article in this thread, there is no scarifice here anyways.

 
Per Shorebreak: "We’re in for trouble, and sooner than we care to admit."
 

Yeah ... Right ...  So how sooner is this "Armageddon" coming?   :-)

Yours Truly,
- Anon
In FED I Trust  :-)
4
ytytytytytytytyt158 posts since
Jan 28, 2013
Rep Points: 623
7. Sunday, May 19, 2013 - 6:50 AM
To me, all of us are "investors" who want to keep the value of our hard-earned money and make a little profit, if possible. 

We need to be adaptive to the current economical "climate."  There are factors under our control and there are factors that are beyond our control.

Our task is not to have debates or influence economical policy makers (that gets us nowhere), IMHO.  Our task is to (1) know the current economical environment/climate/trend, and (2) seek ways to make the best of it.  For example, for retirees: maybe a little carefully planned and diversified equity portfolio (with say 10-15% of one's total portfolio) is ok (instead of all cash which is subject to inflation and poor savings rate)?  Just an idea for adapting to the climate.

We all know that the weather is not under our control, yet, we try to single-handedly change the economical climate/environement.  Just live with/in it, make the best of it, and enjoy it.:D

My two-cents without retribution. 
6
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,426
Reply