In today’s edition of the Courier News, guest commentator Silvio Laccetti discusses how prevailing interest rates are hurting seniors. That’s a topic that’s been bugging me for a long time, because the monetary policies of Federal Reserve Chairman Ben Bernanke are the reason why financial institutions are paying their depositors so little on savings and CD’s.
By holding the Federal Funds rate to virtually zero and the Discount Rate to half a percent, Bernanke is giving the banks a bonanza of cheap money: This is strengthening their balance sheets at the expense of average depositors and senior citizens who have seen their income drop as the Fed keeps rates artificially low.
A quick back-of-the-envelope analysis shows that seniors – over 36 million in the U.S. according to 2004 Census data – may have lost as much as $44 billion in annual income since Bernanke dropped rates to the current artificially low level.
Think about it the next time you visit your bank: cheap money for them, lost income for you. The low return on deposits mandated by Federal Reserve policy is in large measure paying for banks’ stability.
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