Is the Federal Reserve ruining American Savers

[macker]

With US politicians spending trillions of dollars that they don't have they clearly don't seem to understand the problem that they have. The combination of massive spending and massive printing spells disasterous consequences for hard working, honest savers. Right now what the Federal Reserve is doing is ruining an entire class of people. How can a saver truly save when the Fed is destroying savings and there is no yield to be found as rates are being artifically suppressed. As the Fed continues to print money your only choice is to own real assets that may depreciate but likely not to the same degree.

The Fed claims to be on the sideline but ready to print more money but this is not the case and they are lying as they are in the market right now. All you have to do is look at the Feds own charts which don't lie.
http://research.stlouisfed.org/fred2/graph/?id=M2


Heard Paul Volcker and John (Jack) Bogle speaking on this today and I would feel a lot better about the outlook for the US and the markets in general if these two 80+ year old farts were in charge of things.

[Rathji]

Huh?
Tower is that you?

[CaptainCrunch]

I don't understand the point of argument.

Are you arguing that because the fed is putting more money into circulation that American's have access to less money and thus it destroys your savings?

I would argue that less stringent credit requirements combined with overspending and having to maintanin high rates of interest hurts savings more.

Of the crash of the market which ruined speculators.

Or the loss of jobs.

But I don't get what that chart is saying besides the fact that there is more money in circulation now then back in the day.

[photon]

AUDIT THE FEDERAL RESERVE!

...

Sorry, just got caught up in the moment.

[moncton golden flames]

yes. printing more money devalues the currency and thus the purchasing power of the dollar.

[macker]

They are inflating the money supply and this hurts people who save. They say they won't raise rates until the end of 2014 Three years with short term interest rates near 0%.

Basically the Fed is trying to lure people into borrowing to stimulate the economy but this hurts people that rely on fixed income investments as there is no yield to be found. Not only does it hurt retirees but also insurance companies and pension funds who rely on fixed income.

These effects are far reaching based on the size of the US economy and puts pressure on Canada to keep its rates low also to stay competitive. It is a desperate tactic that hasn't been shown to work and unemployment is still a problem after all the money flooding they have been doing for the last few years so I am not convinced it will help but just makes a bigger problem down the road.....but also hurts people who need fixed income investments now......
http://gicdirect.com/?gclid=CL6XjNuM-60CFaYaQgodRzhYMQ

[Cowperson]

Originally Posted by macker

With US politicians spending trillions of dollars that they don't have they clearly don't seem to understand the problem that they have. The combination of massive spending and massive printing spells disasterous consequences for hard working, honest savers. Right now what the Federal Reserve is doing is ruining an entire class of people. How can a saver truly save when the Fed is destroying savings and there is no yield to be found as rates are being artifically suppressed. As the Fed continues to print money your only choice is to own real assets that may depreciate but likely not to the same degree.

The Fed claims to be on the sideline but ready to print more money but this is not the case and they are lying as they are in the market right now. All you have to do is look at the Feds own charts which don't lie.
http://research.stlouisfed.org/fred2/graph/?id=M2


Heard Paul Volcker and John (Jack) Bogle speaking on this today and I would feel a lot better about the outlook for the US and the markets in general if these two 80+ year old farts were in charge of things.

Why do you think rates are being artificially suppressed? What would be their natural state at the moment?

Meanwhile, if politicians do nothing, budget deficits should decline sharply in coming years:

http://www.nytimes.com/2012/02/01/us...g.html?_r=1&hp

Cowperson

[macker]

This is a hefty cost for safety and liquidity as it implies an erosion of purchasing power over time. But it also represents a significant savings to heavily indepted US. This quantitative easing continues to exert downward pressure on yields. You can argue it is necessary but there is a clear result here. The fact that Bond yields stayed depressed for most of the second half of 2011 shows that what they are doing is working in many ways....

[SebC]

What do you want? A money supply that can't grow with production (deflationary, people avoid buying things because everything gets cheaper over time)? A money supply controlled by the US government?

How are savings being destroyed anyways? Is there rampant inflation?

[missdpuck]

Dumb question-are you guys as bad at saving money as the average American seems to be? I will say that the people on this board are far more savvy than most Americans i know. Then again, I'm usually exposed to the losers at the post office (of which i am one).
But seriously, I see young people here saving for all kinds of travel, buying homes at young ages. I get the impression you are far more frugal and realistic about finances.

[Rathji]

Originally Posted by missdpuck

Dumb question-are you guys as bad at saving money as the average American seems to be? I will say that the people on this board are far more savvy than most Americans i know. Then again, I'm usually exposed to the losers at the post office (of which i am one).
But seriously, I see young people here saving for all kinds of travel, buying homes at young ages. I get the impression you are far more frugal and realistic about finances.

Not all of us, the broke fools like me just don't talk about it much. I like to console myself that my financial woes are due to me being a student supporting a family, but give me 5 years and I will prove I am a screw up!

In reality, I would wager that the average awareness of a CP poster is probably a couple magnitude higher than an 'average' US citizen. That probably means more people have thier ducks in a row here than in the general population. Take a look at the income poll thread from a month or so ago - although a lot of that might be due solely to oil.

[Jason14h]

Short America then

[freedogger]

Originally Posted by SebC

What do you want? A money supply that can't grow with production (deflationary, people avoid buying things because everything gets cheaper over time)? A money supply controlled by the US government?

How are savings being destroyed anyways? Is there rampant inflation?

Credit is just another resource for the production of goods or services. There is nothing magic about it. It is most efficiently allocated by the supply and demand pricing mechanism of a free market. We don't fix the price of equity capital, labor or raw materials because we know price fixing allocates resources inefficiently. Fixing a price to low creates shortages, and fixing a price to high creates a glut. Having a central bank impose an artificial price and quantity of credit is not in the public interest. It is only in the interest of undisciplined governments and their banking cohorts. The core of this hoax is our accepting the notion that the price and quantity of money must be managed by someone wiser than market forces.

This hidden banker tax is manifested in many ways. One of the worst ways we pay the tax is in a regressive form of inflation. Governments like the hidden tax of inflation because it softens the discipline of having to balance the books. Central bankers like inflation too. It creates the appearance of a false prosperity and allows them to prop up the collateral supporting the private banking system. When Bernanke says he wants to target a 2% inflation rate he is truly saying he wants to confiscate nearly 25% of your cash every decade. But as everyone# experiences their own unique inflation, it is the poor who suffer most.

When a central banker says he is trying to help make credit available, run the other way. Every benefit has a cost. There is no free lunch. We have been tricked into believing monetary policy is operated in the interest of the people. The reflationary propping up of these assets only serves bankers and overleveraged investors. Reflationism does nothing for the average guy. Inflation strikes first at the cost of food and energy. The billions of people world wide who spend a large proportion of their income on food and energy are literally starved and frozen to# death to support this global elite cabal.

http://www.zerohedge.com/news/guest-...r-tax#comments

I would add a couple of points to this. Seniors or anyone on a fixed income are further hurt in that they are forced into taking on more risk to make their savings work for them.

Zirp is a trap that is nearly impossible for a government to escape from. If the US raised rates, the interest payments would quickly overwhelm the country's finances...

The last point, it lets governments finance war and huge military expenditure. Vietnam was only possible with USA off of the gold standard. Most other large wars have a similary funding model.

[missdpuck]

Originally Posted by Rathji

Not all of us, the broke fools like me just don't talk about it much. I like to console myself that my financial woes are due to me being a student supporting a family, but give me 5 years and I will prove I am a screw up!

In reality, I would wager that the average awareness of a CP poster is probably a couple magnitude higher than an 'average' US citizen. That probably means more people have thier ducks in a row here than in the general population. Take a look at the income poll thread from a month or so ago - although a lot of that might be due solely to oil.

Yeah, I thought about the oil money after I made the post.

But Rathji let me just say how much I admire you for going back to school. I wish I had done it. My excuse is "fear" and listening to others instead of myself.

My brother did what you are doing. He joined the Army and ended up in Korea. He met an American girl over there, she got pregnant and they both got out due to "family hardships"--long story. They got a little apt., he went to community college (he's 21 at the time) and they both worked. Then he got a job as a UPS manager and quit school. My mother-in all her misguidedness- was thrilled. UPS! That's great! But it drove my brother insane. He had the balls I never had--he wanted something better. He went back to school at 27, (still with a wife and kid, of course), graduated Magna Cum Laude from FIT and ended up with a great career designing airports and travelling the world. Not necessarily in demand in this country--but jobs in Pakistan, Dubai, and even Transylvania have provided him with a nice living.

Rathji, you ARE NOT a screw up. Please. It's people like me that give up. We are the screw-ups! I am very proud of you

[Rathji]

Originally Posted by missdpuck

Yeah, I thought about the oil money after I made the post.

But Rathji let me just say how much I admire you for going back to school. I wish I had done it. My excuse is "fear" and listening to others instead of myself.

My brother did what you are doing. He joined the Army and ended up in Korea. He met an American girl over there, she got pregnant and they both got out due to "family hardships"--long story. They got a little apt., he went to community college (he's 21 at the time) and they both worked. Then he got a job as a UPS manager and quit school. My mother-in all her misguidedness- was thrilled. UPS! That's great! But it drove my brother insane. He had the balls I never had--he wanted something better. He went back to school at 27, (still with a wife and kid, of course), graduated Magna Cum Laude from FIT and ended up with a great career designing airports and travelling the world. Not necessarily in demand in this country--but jobs in Pakistan, Dubai, and even Transylvania have provided him with a nice living.

Rathji, you ARE NOT a screw up. Please. It's people like me that give up. We are the screw-ups! I am very proud of you

Oh, how little you know!

Thank you for the words of encouragement though. It wasn't easy to go back, but the industry I was in was brutal on the body so it was going to happen sooner or later.

The most nerve racking part of the whole thing though was finding my first job in the industry. Imagine walking into companies applying for IT positions with a resume that says "Hacked apart dead cows for 12 years". Places that are the tech equivalent to working at McDonalds were turning me down.

Lucky for me I found a place that was willing to take a flyer on me, and it has worked out quite well.

[username]

They are increasing the money supply which is true however trillions of dollars were destroyed during the recession so I'm not sure just how much they are actually adding to the money supply.

[Slava]

The other possibility is that the fed is "gently" pushing people to take a little more risk with their money. When you get nothing for interest rates it will persuade people to invest in things that are marginally higher risk to earn a little more.

[Hack&Lube]

Savings are not for investments anyway. Anybody who really wants their "savings" to grow will be invested a variety of funds and other instruments.

Any many economic climates, inflation could potentially outstrip the interest rate of savings so it's silly to expect to be able to sit on your nest egg.

Like Slava said, encouraging smart investment is what it's all about. It's how you grow the economy.

[macker]

^
You are ignoring standard deviation and beta and the consequences of risk on investments along with proper asset allocation. If you look at the returns of the 90 day Canada tresury bill rate of return since 1950 it has been 5.7% with a risk factor of 4. 5 year GIC rate of return since 1950 6.9% with a risk factor of 3.4 and DEX Long bond index over the same period of time 7.5% with a risk factor of 9.8.

What you are suggesting is that people should suck it up and give up on modern portfolio theory and managing risk in retirement time zone etc. and move up the ladder as the FED knows best and most people are better suited chasing the long term return of the S&P TSX Composite of 10.3% and just ignore the fact that the risk factor is 17.1. After the lost decade I am sure a lot of retirees will be happy to hear this strategy and won't worry about asset classes that have been removed from the pie. What about people that don't want to take on as much risk in their investments. Where should they park their money?

[missdpuck]

Originally Posted by Rathji

Oh, how little you know!

Thank you for the words of encouragement though. It wasn't easy to go back, but the industry I was in was brutal on the body so it was going to happen sooner or later.

The most nerve racking part of the whole thing though was finding my first job in the industry. Imagine walking into companies applying for IT positions with a resume that says "Hacked apart dead cows for 12 years". Places that are the tech equivalent to working at McDonalds were turning me down.

Lucky for me I found a place that was willing to take a flyer on me, and it has worked out quite well.

That's awesome.
I think we discussed this before-my family had a meat packing/slaughterhouse business in NJ. It is brutal. So glad you are out of that.

Carrying mail is tough on the body too. And the boredom and repetition (to me) is insane. And the ever present threat of getting into a wreck and getting fired. it is not what some people think it is.

I already have a plan for whatever personal financial collapse I might face. I'll just put a used double wide on the partial swampland i bought for 3K. Yes, i wanted swamp--if the area is partially unbuildable, all I have is gators for neighbors