Favoring Borrowers Over Savers

On Wednesday, Feb 24th, Federal Reserve Board Chairman Ben Bernanke testified before a House Committee.  Bernanke stated interest rates will remain at record low levels for an extended period of time to ensure the nation’s snail pace recovery remains on track.

Yeah,  if you are a borrower.  You want to buy a house?  Great, interest rates are near historic lows.  Buy a car?  You can find a low rate  as well.

[The banks, whom American taxpayers bailed out, are showing their appreciation by sticking it to American consumers by raising the interest rates on credit cards and reducing credit limits.  Even more insulting, banks will charge consumers for “inactivity” – for not using their credit cards.  Amazing!  What would bankers have done if the American taxpayer hadn’t rescued them?]

If you are saver, however, you are out of luck.  The interest rate on a savings account, barely 1%.  On a one year CD, if you’re lucky, 1.5 to 2.0%.  Five year CDs offer the best interest rate but who wants to lock up their money for  such a long period of time especially with most economists projecting the Fed will have to raise interest rates in the future?

What’s ironic is, because of the Great Recession, Americans are saving more today than at any time in the last 10 years.  Yet, the interest earned is pathetic.  Despite the disincentive of historically low interest rate on savings, people are saving because of the very fragile economy.

If you are a retiree living off of fixed income, you’re hosed.  The money you have socked away is basically earning nothing.

Mr. Bernanke, stopping thinking about borrowers only.  Dangle a carrot before the eyes of savers.  Increase the federal funds rate.

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