When Savers Get Punished
Since the end of 1999, the stock market has not come close to keeping up with inflation.
Now hold that thought, because we’ll come back to it in a second.
Over the past year, an incredibly worrying trend emerged. No one is talking about it. The market cooled down, the Fed lowered expectations, but food and energy prices continued to rise. In fact, almost everything you can think of has been on the rise.
But the flat savings rate makes it impossible for us to keep up with this trend. Your money is shrinking in buying power each day.
The Daily Show proves a great ground for testing unintended economic consequences like inflation (so much so that we included a clip with Alan Greenspan in our documentary I.O.U.S.A.). Host Jon Stewart got Dr. Greenspan to agree that there’s no such thing as a free market. Then Stewart ventures: “When you lower the interest rate and drive money to the stocks, that lowers the return people get on savings.”
Dr. Greenspan: “Ah, yes indeed, yes indeed.”
“So they’ve made a choice,” says Stewart. “We would like to favor those who invest in the stock market and not those who invest in banks. That helps us.”
“That, no . . . that’s the way it comes out,” says Dr. Greenspan, “but that’s not the way it is.”
So, bottom line, you’re more likely to put your money into stocks, thanks to the Fed.
Say you wanted to play it safe, the way your grandparents and parents did and invest in a CD. From 2010 to today, we’ve ...