Is it a punishment to be a saver in today’s economy? A buck buys a nickel’s worth, your bank pays you pennies on the dollar for your deposits, and the only way to beat inflation is to dive into the stock market. This is not normal. For more than a decade, the central banking cabal has clandestinely declared war on savers worldwide, a battle that is expected to rage on for many more years to come. It is no longer financially responsible to tuck away your quarters, nickels, dimes, and pennies because it will fall victim to monetary debasement and price inflation. And the globalists would not have it any other way.
A Century of ZIRP
Throughout most of the 21st century, central banks worldwide have adopted a zero-interest-rate policy (ZIRP). In extreme instances, some of these institutions have implemented subzero rates. The Federal Reserve immediately slashed rates in the aftermath of the Great Recession, participating in a temporary tightening of monetary policy near the start of President Donald Trump’s tenure. Before the coronavirus-induced market meltdown, the Fed began to ease rates. By the time COVID-19 decimated the economy, Chair Jerome Powell and his merry band of central planners brought rates to nearly zero. Are negative rates next? The Fed has insisted that it is unlikely to embrace this tool, potentially waiting for the next steep economic downturn to employ the unconventional measure.
Following the 2008-2009 recession, other organizations refused to even entertain the idea of normalizing policy. From the Bank of Japan (BoJ) to the European Central Bank (ECB), the central bankers determined to maintain an accommodative framework to resuscitate their anemic economies. With little success, these entities only exacerbated their problems by blowing bubbles, adding to the national debt, and subsidizing moral hazards that threaten markets’ long-term health.
Since the world is buried in a financial crisis, most people are unlikely to see rate hikes anytime soon. This means, unfortunately, pittance on the returns of your cash deposits and bond holdings. Is it time to put your entire life savings on Tesla, Amazon, and Apple? As Wall Street bros like to say, YOLO!
Let the Market Dictate Rates
In today’s chaotic times, it is clear the Fed manipulates the public and distorts the economy by manually setting both short- and long-term interest rates. This absolute power over rates, which forces the traders on the New York Stock Exchange to hang on to every word spoken by policymakers, is part of its mandate. But what would happen if the free market dictated interest rates without any statist interventions? Well, the invisible hand would look to the people and monitor supply and demand. Put simply, if consumers are saving more, it means they plan to acquire more goods and services in the future. So, an increase in savings will reduce rates, making borrowing cheaper for businesses and other entrepreneurs that will make long-term investments to satisfy future demand. This is a critical function of the market economy because it coordinates, without a centralized institution, consumers’ preferences, and establishes order. It can be difficult to gauge real interest rates today because they are arbitrarily and artificially set by a dozen people.
Can You Blame the Public?
The surveys suggest that half the country is one paycheck away from devastation, and two-thirds hardly have anything saved for a rainy day. This is fiscally irresponsible, but it is also understandable.
The U.S. personal savings rate has been in single digits for about 30 years. This year, Americans were forced under house arrest, and businesses shuttered their doors, so consumers did not have much to buy, which allowed the country to save a third of their income. With the economy opening up gradually, shoppers are spending more again, a crucial development for a nation that is two-thirds consumption.
But can you blame households for not saving enough? Unless you pour 100% of your capital into the stock market, you are going to receive next to nothing on your savings. In fact, inflation, even by the most generous of calculations by the federal government, is higher than what you would get from your bank account. What motivation is there to save if the money you set aside becomes worthless by the time you need it? You cannot fault consumers for getting a dopamine and serotonin injection by tapping, swiping, and inserting pieces of plastic into POS terminals.
You might be wondering why governments and central banks are fond of low interest rates. When borrowing is cheap, governments can spend at will, no longer worried about ballooning debt-servicing payments during the years to come. The indebted can continue to pile on and swim in an ocean of red ink, maintaining the mirage of prosperity. The stock market receives a fresh injection of cheap money, either directly from the Federal Reserve printing press or yield-starved investors who want to believe in the idiom of letting your money work for you. This neo-Keynesian approach to monetary policy abandons the class of savers, a philosophy that also threatens the long-term health of a national economy. And perhaps this is what the globalists want: The destruction of an autonomous and independent country that requires a lending hand from foreign institutions. The most dangerous words in the English language are: “Hi! I’m from the IMF and the World Bank, and I am here to help.”
Read more from two-thirds consumption.
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