Do Something for the American Saver! -

Just when you think the world can’t get any worse, something else appears. Months ago I spoke of Whack-a-Mole, you know, the carnival game where moles pop up while you try to whack them with a mallet. The only difference is the damn Greek mole just won’t go away!  Wait, that’s not 100% accurate. A few months ago we thought Europe fixed their financial woes when the European Central Bank granted three-year loans to all countries in need of one. How did that turn out? Greece is now on the brink of leaving the Union and dominoes named Spain, Portugal, Italy and Ireland may fall soon after.

What does this all mean? Is Greece really that important?  We’ve had crises with sovereign debt in Russia and Argentina, so should the world really care so much? Listen, all this crap will slow all the world’s economies, but do you know what it does to the U.S. dollar? When the world goes into free-fall and fear is everywhere, the whole world runs to the U.S. dollar. The U.S. dollar is the go-to currency for money in search of a safe harbor. Funds throughout the world have purchased Treasury securities of all durations. And, after several months of crisis after crisis, our beloved America now has depressed yields not seen since the end of World War ll. Our 10-year bonds now yield less than 1.5% and 30-year bonds offer 2.60%.

Well, guess what, I’m fed up with it! Our economy has stalled, as witnessed by our employment numbers for March and April. Where are the programs we need to get our country up and running? We need job programs that make our country better. We need job training for those of us who don’t have the proper education. I don’t believe in handouts but we need more stimulation in this low interest-rate environment. We need all our politicians working together, just like we did when rates were this low after WWII.

How would this help American savers? What do jobs programs do for seniors with nest eggs earning 0% in bank CDs? Most American savers, as you know, are seniors. And without yields north of 3%, how will they keep up with rising expenses? An economy that creates jobs and is growing will signal the Fed to raise interest rates to keep inflation in check. AARP should be rallying the troops and recommending that seniors call their congressmen. We’re not asking for higher rates; we’re asking for a stimulated economy that will ultimately raise intererst rates.

By keeping rates low, the Fed forces Americans to invest in riskier assets like real estate or the stock market. However, this methodology hasn’t worked for at least the last four years.

The American saver has been coerced into reaching for more and more risk to satisfy their need for yield. Economists refer to this as “financial repression.” By keeping rates low, the Fed forces Americans to invest in riskier assets like real estate or the stock market. If real estate and the stock market come back into favor and appreciate in value, the Fed believes the economy would be off and running again. However, this methodology hasn’t worked for at least the last four years.

Enter the index annuity salesmen. Many salesmen have misled the saver into thinking their product will protect them from stock market risk while earning a return comparable to equities. Yes, the risk is limited but so is the product’s yield. American savers should know that index annuity returns will be comparable to those in the overall marketplace. Annuities make sense, but understand what you’re purchasing.

The American saver has been dealt a bad hand. They were told many years ago that they could live off their interest. Our government has betrayed this hard-working generation. They deserve better than this “whack-a-mole” economy.

Pay-it Forward:

You can blame the problems of our youth on many things, but I have come to the conclusion that their biggest problem is their need for instant gratification. It’s not just our pre- or post-college grads, it’s everyone. This generation has grown up with this disorder and it has become an epidemic. Delayed pleasure was our whole life back in the ol’ days, but credit cards and the internet, and don’t forget overzealous parents, have turned our kids into pleasure-seeking monsters. As a parent, slow down gratification, and teach your post-grad much joy can be attained by waiting.


Earl E Bird

I'm Earl E. Bird and I am very concerned about saving for my senior years. I am amazed at the stumbling blocks that exist when saving for retirement. That's why I take my time when making decisions on building my nest egg.

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