Below is a short quote that sums up the plight of retired people in this country who were so silly as to think if they worked hard and saved their money they would be able to retire with a modest income from the fruits of their labors. Such has not been the case in recent years. Thanks primarily to an apparent understanding between the Federal Reserve and the White House.
Gambling in the National Interest
The Federal Reserve all but eliminated interest rates in the economic valleys of recent years, so it did not pay to save. Seniors and others who relied on interest income from federally guaranteed certificates of deposits paid a price with their income, even though they were least able to. "It's basically (a transfer of money) from people who are thrifty and save to people who are spendthrift."
page 151 "Corporateering" by Jamie Court
It would seem that savings is not helpful to Wall Street and the investment industry. By forcing the interests rate down on short term Certificates of Deposit (CDs) to around 1% to 2%, the people who are retired -- or hope to be -- are forced to invest (Ha!)
speculate with their savings in order to make ends meet. If you have kept up with the stock market you will know that in the past 6 years, it is up about 12% since 2001. So we not only fail to make a return, we risk losing our capital.
When the Fed cuts rates artificially low it serves two purposes :
(1) It causes Corporations to be able to borrow American's money from banks which is passed along to them in loans that are practically free.
(2) It forces Americans retirees into the risky arena of Stock Market gambling.
Consider this --
If a couple retired early (before age 65) and hope to maintain a standard of living enjoyed by a median income family ($46,000 per annum) with the interest rates available for secure savings (CDs) during the years 2001, 2002, 2003 and 2004 they would have had to have approximately $2,000,000 in savings to have done it. In my area (GA) you could not get more than 2% on CDs in those years. $2 million at 2% would only yield a retiree $40,000. How many working people do you know who have managed to save $2 Mill ?
But let's assume a Social Security income of $20,000 for a couple. How much savings (at 2%) will they need to round it up to median or $46K ? About $1,000,000 dollars.
I personally accuse the Republican administration and the GOP Congress of breaking the social contract that this country has had with it's working class people. That contract stated that if you worked hard, obeyed the laws, paid taxes and saved a portion of your wages each month, you would have enough savings to make your old age comfortable. As you can see, the last two Republican Chairmen of the Fed have made a lie of that contract.
For those not familiar with CD rates, they tend to run a little below the two year Federal notes. Those yields - going back to 1976 -- can be seen at this site :
http://research.stlouisfed.org/fred2/data/GS2.txtIf they plan in advance, retirees can live on rates of 6%. But 2% is equivalent to slave wages in the old Fascist countries.
If all DUers who are retired -- or hope to be in the near future -- would force our politicians to discuss this issue, we would all be better off.
We could call our protest --
"We accuse!" Or as our French friends would say
"J'Accuse!"
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