The Federal Reserve’s zero interest rate policy (ZIRP) of the past half dozen years or so has been a financial act of war on the country’s seniors and, for that matter, on all savers. Under ZIRP, interest rates are artificially lowered through the Fed’s monetary policy popularly known as “QE,” quantitative easing.
The primary reason for this is twofold: first, to allow the Federal government to borrow money at next to nothing in order to maintain its current gargantuan level of spending; and, second, to prop up the Nation’s insolvent banking system, which can continue to engage in all sorts of reckless speculations.
ZIRP is extremely hard on seniors who, for the most part, can no longer rely on earnings through employment income, but have to live on their accumulated wealth. Instead of reaping the rewards for a lifetime of frugal behavior, seniors are being systematically fleeced by the Fed’s action.
ZIRP is actually “class warfare” — not in the Marxist/socialist sense of “labor versus capital,” but in its surreptitious redistribution of wealth from savers (retirees) to the government and politically well-connected financial elites. Moreover, the Fed’s action is turning seniors into a dependent class whose members are no longer able to sustain a reasonable standard of living.
Not only are retirees and savers punished by ZIRP, but the policy is quite destructive to the entire economy since low interest rates discourage savings, which are key to economic growth. Savings provide the means (capital) for production. Without savings, lengthier and more complex production processes will not take place. The personal saving rate in the United States has plummeted for years, with the current level at about 4 percent of disposable income.
The amount of savings is also crucial for the level of employment and wage rates. Greater savings allows entrepreneurs to hire additional labor plus offer higher wage rates. Policies such as ZIRP have destroyed the savings pool not only in the United States but throughout the Western world, which explains, in part, the persistent high levels of unemployment and stagnating wages. Organized labor should be at the forefront in opposing ZIRP.
ZIRP reduces seniors’ standard of living in another devastating sense. To keep interest rates below market levels, the Fed has to purchase larger and larger amounts of U.S. government bonds. Since the Fed has no assets of its own, it must create money to buy the debt (“monetizing the debt”). This, of course, is inflation, the nasty consequence of which is a rise in the price of consumer goods.
For seniors, not only are they receiving little reward for saving which diminishes their capacity to remain self-sufficient, but the money they do have, because of the Fed’s policy, is worth less and less. John Williams of Shadow Statistics has shown that consumer price inflation over the past year has ranged between 5 percent and 10 percent, far above the government’s estimates.
ZIRP and other such measures are the reasons for the creation of a dependent society where reward for hard work and thrift is being systematically undermined for the benefit of a Leviathan state and the financially privileged. The policy has other societal repercussions as younger generations are coming to realize that since prudent behavior will not be rewarded, they will engage in more present-oriented lifestyles. Can there be any doubt that contemporary America’s hedonistic society has resulted, in part, from the punishment of future-oriented behavior.
Less than the abolition of the Fed and a return to a commodity-based monetary order, the solution to the current financial plight of seniors and the economy in general is for the Fed to immediately suspend ZIRP, which would allow interest rates to rise to “normal levels.” Not only would retirees benefit, but the higher rates would induce greater savings, which would eventually spur real and sustainable economic growth.
Unfortunately for seniors, until the Fed’s interest rate policy is reversed, their retirement will be a lot less prosperous than anticipated, as the years of toil and sacrifice will have been for naught. As with so many aspects of the American dream, the golden years are becoming a thing of the past.
–Antonius J. Patrick
Antonius J. Patrick is a Washington, D.C.-based writer who reports on culture- and religion-related issues for American Free Press.
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