The plight of savers in America is hopeless. We know that price inflation is over 2% per year. What do investors get in a money market fund? A pathetic 0.26%.
Then they pay income taxes on this 0.26%.
What if they do not want to tie up their money for a year? Then they get 0.12%. Before taxes.
What about interest-bearing checking accounts in an FDIC-insured bank? These pay 0.05%. Let’s be honest. Let’s round it off (after taxes) to zero.
The saver is falling behind. The rate of price inflation is eating into the saver’s net worth by at least 2.9% per year.
How much money is deposited in money market accounts. About $2.6 trillion. This is up by $2.6 billion this week.
This is a recovery?
Why are rates low? Because businesses are not borrowing, and bankers are not lending. What kind of economic recovery is this? It’s not a recovery on Main Street.
There is a disconnect between the stock market and the economy. Stock market investors are saying this: “It does not matter what happens to savers, small businesses, and all but 10 large banks out of 7,000 banks. The big banks hold 77% of all American bank assets, up from 55% in 2002. That is what counts.”
How does the little guy get ahead? Not by putting his money in a money market fund and holding it.
How long can this go on? At 2.9% price inflation per year, in 25 years, the dollar will lose half of its purchasing power. (The “rule of 72.” Divide 2.9 into 72.) At some point inflation will rise, interest rates will rise, and savers will still be behind the eight ball.
This is crony capitalism. This is what Reagan’s ex-budget director David Stockman calls the Great Deformation. He saw it coming. He resigned.
The financial system is rigged by politics to squeeze out the common man. The common man senses that something is wrong, but he does not know what.
I will tell you what: Keynesianism, which is funded by the Federal Reserve System.