Savers among hardest hit by low interest rates
Kai Ryssdal: The Fed's policy of keeping interest rates near zero through mid-2015 is clearly good news for anybody who needs to borrow money. Money for a house or a car or expanding a business, maybe even hiring a few people.
But Mr. Bernanke said yesterday, if you've got other plans for your money:
Ben Bernanke: Save, save, save.
There are gonna be some downsides. Marketplace's Mitchell Hartman has that slice of it.
Mitchell Hartman: ‘Neither a borrower nor a lender be,’ says Polonius to his son in Act I of Hamlet. Though if Chairman Bernanke were playing the part it might be more like: ‘A borrower or a lender—beest thou most certainly. But a saver? Not so much.
Olivia Mitchell: It does have an effect on people like my mother.
Olivia Mitchell runs the Pension Research Council at the Wharton School. Her mom recently turned 90. Her nest egg’s sitting in CDs.
Mitchell: Which she thought were going to be very, very secure for the long run and pay off enough interest until 100. So this is something that people that really were very risk-averse, as my family was growing up during the Depression, was hoping to live on. And it’s just not paying off.
Basically, Mitchell says, the Fed is picking winners and losers.
Mitchell: So across the board, it’s pretty much a wealth transfer, from the retired population, to other sectors of the economy.
Like homeowners and stock investors.
I ran this plan by some men at a local coffee shop. They were meeting to organize sailing races on the Columbia River this fall. Bill Symes is 65, a retired university administrator.
Bill Symes: We’re in a state of paralysis. We have money in safe investments, it’s not been very safe. The pillowcase is probably the best place for our money right now.
George Yioulos is 29 and he owns a small business that sells sailboats.
George Yioulos: I would much rather my customers buy products when they’re comfortable, financially sound, and from their savings.
Yioulos says his personal financial conservatism trumps any economic opportunism he might feel, as a business owner that the Fed is trying to help by pushing cheap money.
I’m Mitchell Hartman for Marketplace.