Monday, December 6, 2010

Mr. Bernanke, Raise Our Interest Rates!

     The U. S. government, courtesy of Federal Reserve Chairman Ben Bernanke, is stepping on interest rates, crushing them down as low as they can go. Interest rates, in many cases, are below inflation rates -- which means if you don't spend your money right away, you're losing purchasing power. This is a good situation if you, like the federal government, owe lots of money. It's also good for young people who are borrowing to pay for college, or taking out a car loan or applying for a mortgage to buy a house. Of course it doesn't help -- as many young people have discovered -- if you don't qualify for the loan. And it hasn't trickled down to people who owe a balance on their credit cards, since those rates remain painfully high.

Bernanke -- No friend to Seniors
     It's also not a good thing for senior citizens, retired people, early retirees or the unemployed who are trying to supplement a fixed income with interest they receive from a bank CD or money market fund, or who are in the process of buying an annuity or getting a reverse mortgage. Low interest rates add insult to the injury of Social Security. Already, for the second year in a row, Social Security has frozen benefits. Now, in addition, seniors are taking a "pay cut" in the form of less interest on their savings.

     A couple of years ago, when I took early retirement (okay, to be honest, when I was forced to retire; okay to be perfectly honest, when I was unceremoniously tossed out of my corporation by the top executives who were looting company coffers for their own options and bonuses) I left with a reasonably respectable lump sum payment. I took a chunk of that money and stashed it in a nice, safe money market fund. It paid $700 or $800 a month in interest and provided me with a little financial cushion. But today, that same amount of savings pays me a paltry $25 a month.Thank you, Mr. Bernanke.

     In the U.S. today an estimated 25 to 30 million people live on a fixed income and rely on interest from their savings to supplement their standard of living. Mr. Bernanke has forced all of them to take a pay cut. Some of these people are well off and can afford to take a hit -- and maybe they have other investments to make up the difference. But the overwhelming majority are merely taking in a few extra dollars to supplement their pension or Social Security check -- and those supplemental dollars are getting squeezed down to nothing.

     Of course, Ben Bernanke's low interest rate policy is a good deal for the federal government, which is borrowing money like an addicted gambler. And it's been a boon to banks and financial institutions on Wall Street, and maybe some people who have been able to refinance their mortgages. But for the 60-plus crowd it's meant nothing but financial distress. And do you really think it's fair that senior citizens who've saved up a bit of money for their retirement should be the ones bailing out Wall Street?

     So, Mr. Bernanke, help out some older people. Raise those interest rates!

     Besides, a lot of retired folks, if they got a little better yield on their CDs, would go right out and spend that money. I think they'd do a better job than the banks in stimulating the economy. Don't you?

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