Posted by: philipfontana | September 28, 2012

Savers Suffer

Low Rates, Savers Suffer, & Governments Benefit,

While Media Silent!


      Unemployed shown at Volunteers of America Soup Kitchen during the Great Depression, Washington, D.C., circa 1936

     Excuse us for living, but thank God this is NOT the Great Depression our parents talked about. Yet, the truth always has a way of eventually coming out of hiding. And it has taken nine months for it to hit the media since the first “Excuse Us…” post that launched this website. That post was based on a newspaper op-ed commentary I wrote on the plight of the average person and low fixed interest rates as opposed to stock market equities and investments with variable interest rates. Compared to today’s rates, those rates were high just less than a year ago!


     A Depression era President Franklin Delano Roosevelt in, perhaps, his most famous 1930’s photo

     And while the Great Depression this is not, our times will definitely go down in history as the Great Recession. Just look at this major story that ran in The New York Times, September 11, 2012, by Catherine Rampell. She reported that interest rates are low around the world and that it is not a coincidence. Rates, she continued, are “determined not only by markets, but also by government policy” and “right now many governments say they have good reason to keep their borrowing costs as low as they possibly can.”

The facts tell us that while low interest rates are bad for people struggling to live off their savings, low interest rates are, naturally, good for those borrowers! Interest rates well below the rate of inflation enable governments to “refinance, erode or liquidate their debt, making it easier to live within their budgets without having to resort to more unpalatable spending cuts or tax increases.”

Adding insult to injury, besides keeping interest rates low, governments are encouraging pension funds and banks to buy their debt. In effect, we the consumers are unknowingly underwriting the government debt! Economists say this phenomenon is like a hidden tax on people’s savings or wealth.


     One of the most well known New Deal programs to confront the Depression was the National Recovery Administration, the NRA, logo pictured here

      While we all figured out what was going on, we never found this economic news in print or in the media in any form. Just seeing it here explained in print seems to be an oversimplification of what we know is a more complex full picture. (For that I refer you to the entire article cited above.) The same point was made by a University of Tennessee law professor, Glenn Harlan Reynolds (, in a September 2, 2012 column in the Daily Record newspaper (a Gannett newspaper of Morris County, New Jersey). He makes the same case in simple, clear terms:

“The Federal Reserve’s low interest rates are a boon to overextended banks and to the borrowers who owe them money. (As well as the world’s greatest debtor, the U.S. Treasury.)(underlining added) But these benefits come at the expense of savers…The low rates are, basically, a tax on savers for the benefit of borrowers and those who made bad loans.”


Federal Reserve Building, Washington, D.C.

 Reynolds goes on to describe the “double squeeze” on senior citizens when to low interest rates you factor in inflation and the cost of basic needs. He says with this double squeeze we have the makings of a “major national crisis.”

But then he makes the salient point that one thing is missing: “the kind of news media attention you usually get with this many senior citizens suffering in an election year.” In essence he asks, where is the sad news coverage about old people who saved for retirement only to be squeezed by low interest rates and higher prices? What about those choosing between their medicines and food or letting a pet go or moving in with their children? He concludes, “We’re not hearing much.”

Excuse us for living, but now we HAVE heard about it and, I suspect, this is just the beginning.

Comments: Please!

Suggested Reading: The Party’s Over: How Republicans Went Crazy, Democrats Became Useless, & the Middle Class Got Shafted, 2012, by former Republican conservative political writer Mike Lofgren, retired Congressional staffer of 28 years


  1. Howdy Phil and Geri,
    Yes, it is the Economy sir. I know we have had this discussion. The plight of the savers, investors, risk takers. Currency valuations, public vs private employment. Equities vs. bonds. Everyone wants to be a winner. Or be able to survive with a decent style of living. Mankind, the Greatest Place and Time to be alive for most of the masses. Hyper inflation around the corner. Not possible? Germany and Africa not to long ago. Reserve currency, the good old US dollar.. At one time. Tomorrow, maybe a new currency around the corner. I have tried to live a somewhat simple life. Considering all factors. God Bless self choice to some extent. Staycations, has been a word in our vocabulary for a long time. Continued sacrifice by many. We need to all count our blessings. Control our human desires. We do have interesting, challenging, frustrating times ahead. QE3 cranking up the greenback printing press,85Billion this month, 40 billion to the extended future. Oh, Boy! Seems like a train wreck waiting to happen. Chin up, we will find the courage and will to resolve these issues. At least we hope and now need to face the difficult choices. God ‘Bless and cherish the things of most value. Family, Friends and health for the day. Peace.

    • John & Mary Louise,

      As always you hit all the buttons & cover the field with good analysis & a philosophical look to the future. Most of all, I value your suggestions of living the simple life & your spiritual comments to look at our cup overflowing & those we love that surround us. Thanks as always for being there, Giovanni!!!


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: