How the Fed Hurts Retirees
By Annalyn Censky | CNNMoney.com
Fri, Mar 23, 2012 1:08 PM EDT
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The Federal Reserve has kept interest rates near zero since 2008, but the economic boost comes at the expense of these savers.
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This is basically saying that the time preference for delaying consumption is ZERO!
When folks were planning their retirement decades ago, who would have guessed a zero interest rate scenario? Any financial advisor, who did, would looking for a job. There was always talk of the after tax interest rate minus the rate of inflation. That was figured at anywhere from 5 to 8%.
Now the after tax rate is ZERO and the inflation rate is guesstimate at 5%. (Pay no attention to the smoke and mirrors being blown up your <synonym for donkey> by the “news anchors”, the FED, politicians, and bureaucrats. You’ve seen the price of gas, the national debt, the amount of “dollars” being held by the various bailed out banks.)
The reason that the FED is holding the interest rate down is to allow the Gooferment to carry the national debt with ease.
The retirees are only one group that is being hurt.
There’s a long list; not the least of which is anyone considering making a capital investment. What is the true cost of capital? (I know some businesses that are making a 12% assumption. Based on historical averages in previous business plans.)
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