Easy Money and the Future

Prof Rajan has penned a short piece regarding the evils of easy money. He makes the point that with the extra low and artificial interest rates people should be spending and not saving, but he argues why the contrary is true and why the burden has been placed square on the shoulders of the savers.

Now one should remember that the good old 401Ks have continued but at an ever increasing pace. Yes they were reduced in number as people were let go but as companies eliminated defined benefit plans for retirement they have grown more than what was lost by unemployment. Much of that 401K money does go to assist the growth of the market since people have this forced form of savings and there is no alternative. Housing is now dead.

However the true burden as Rajan recounts is on the saver, especially those older retired savers who may have moved to Government securities now yielding an infinitesimal rate, say 2% when a few years ago it was 6%. That means for the same cash output they must have three times in savings of what they had just a few years ago. Unlikely. Thus it means they have much less buying power or that this low interest rate is really another form of hyperinflation!

Yes, the FED is feeding the banks and their money loving employees off the backs of the old. Instead of eating your young they are eating their old. Now with Washington killing Medicare, well just wait.

One is reminded of the old dictum. Why did God invent Washington? Because Hell was over-crowded! That may have a point in current times.