God Save the American Saver!

God Save the American Saver - www.earlebird.com - consumer friendly annuity blog

More discussions on the third installment of quantitative easing (QE3) are in the news, which is another way of saying “screw the poor American saver.”  With QE3 likely to begin soon, the Fed will continue to buy bonds to keep interest rates at historically low yields. And the rumor is that the Fed will try to maintain low rates now until 2015. That’s almost 2 1/2 years from now. Remember, one of the Fed’s objectives here is to force you, me and all the other American savers into riskier investments for the sake of higher returns. The Fed wants us to buy junk or lower-rated bonds, stocks and real estate. The Fed wants us to abandon our safe harbor investments for the risky shores of volatility. My answer? Don’t do it. Spend down your assets before losing it in the next bubble. Stay safe, American Savers, and trust no one who is pushing risky investments!

Here are some answers to questions on today’s markets and economy:

What is quantitative easing?  That’s when the Fed buys government bonds with printed U.S. dollars to keep interest rates low. Ultimately, the Fed is supposed to sell the bonds back into the market. Don’t expect it. The bonds will stay on our books forever because there are just too many bonds outstanding due to our monumental debt level.

Will interest rates stay low or go lower?  The Fed wants low interest rates to stimulate more borrowing by the consumer. But we know that is a crock. The only folks that can borrow funds at low interest rates don’t really need the money. Interest rates should stay depressed, but if the world stops buying our bonds, then rates will rise. I expect the world to shun our debt forcing yields up as a result. I give it another year or so.

Is it too risky to buy stocks now?  I think Americans have more risk in the bond markets. Interest rates will rise and you will be shocked by how that affects your nest egg. The stock market should always have a place with part of your retirement funds.

Is it a good time to buy real estate?  Real estate has been a very poor investment for five years. But all investments have good and bad times. I think, on average, real estate will do very well for the next decade. So stop renting and go buy a house!

It seems like Europe has calmed down a bit.  What does that mean for the U.S.?  It’s good for the stock market because it will stabilize a large revenue source for our companies, but it will hurt our bond market. Less money will flow to our bonds due to the more stable Euro zone. So interest rates could start to rise as a result. But higher rates mean higher fixed rates, so bring it on!

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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About the author

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.

More posts by | Visit the site of Earl E Bird

 
 
 
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