The government doesn’t want us to save—it’s spend, spend, spend

James C. Sandefer

In a recent official statement, U.S. Federal Reserve policymakers said, “We continue to anticipate that economic conditions are likely to warrant exceptionally low levels of the Federal Funds Rate for an extended period…” In everyday language that means interest rates will probably remain at their current low levels for the foreseeable future. For those of us who aren’t big fans of the central bank and its policymaking arm, the Federal Open Market Committee (FOMC), that news comes as further confirmation of the Keynesian death panel for those comprising a responsible segment of the population having the intuitiveness, means and initiative to save rather than spend.

During economic downturns there’s often mention of the destructive influence of the late economist John Maynard Keynes, and it’s nowhere more apparent than in the area of saving, or lack of it. After more than a decade of mindless spending via the almighty credit the bottom has fallen out and thousands of good folks are trying to make ends meet on a daily basis. After all, it was Keynes who proclaimed that his ideal economy would see “the euthanasia of the renter” and an eradicating of the class of people who are responsible enough to figure out ways for living off the income generated from their savings. In effect, they’re living within their means.

The recent statement by the FOMC also confirms that the monetary sector is gripped by Keynes’ destructive views. As prudent savers and investors, it would be nice to have a voice in this matter, but so far that hasn’t been offered. Even a novice saver understands that a zero interest-rate policy enacted by the Feds during the bailout boon immediately begins eroding all forms of personal savings. Too bad those running the show in Washington don’t see the problem.

However, since Chairman Bernanke recently stated that the economy has bottomed out and is now in the initial stage of recovery, he should consider a modest move upward for rates by raising them by one quarter or even on half percentage point. That would send modest positive signal to savers that the Feds are aware of the issue affecting a large segment of people and wouldn’t disrupt his current policy. Such a move could have a positive, calming effect on world markets as well as sending a signal to them that our economy is recovering and higher rates are likely in the future. The market tends to respond well to such straightforward news.

Early into the recession economists acknowledged the exceptionally low U.S. savings rate and suggesting that it’s one of the leading factors making us substantially reliant on China, the Middle East and other countries that have proven to be our allies when it’s convenient and financially expedient for them. However, the question being asked today is why anybody would want to save in return for such a paltry return? In fact, the return on a typical bank certificate of deposit doesn’t come close to the inflation rate. And yes, we still have inflation, albeit it low in comparison to recent years in many sectors. Don’t forget that the Feds want their share of those measly earnings in the form of higher tax rates. So savers lose no matter how much they try to do the right thing.

In reality, the Fed has been running a scam monetary policy since the mid 1990’s that hammers conscientious savers. Since that time the central bank has continuously increased the money supply at a rate that far exceeds alleged gross domestic product. But it shouldn’t have come as a surprise that most people weren’t saving because they were penalized rather than being compensated for doing so. Conversely, the Fed’s monetary policy has been expedient for all those borrowing money, especially from the banks that have now been anointed “too big to fail.” Factually, the Feds tilted the playing field in their favor until it became a lop-sided game with savers being on the losing side.

Responsible, conscientious savers still have several viable options: 1) continue saving as much as possible in tax-free alternatives such as IRA contributions and educational funds, 2) invest in foreign markets that actually still have an interest in gaining mere savers as customers, and 3) consider buying some form of gold and silver whether it be in actual bullion or shares of companies that deal in it including mining companies.

The bottom line here is that the Feds don’t give a rip about savers and most likely won’t any time soon; it’s every saver on his/her own. It’s also a good bet that the dollar won’t consistently fare well in global markets until Chairman Bernanke begins listening and acting on behalf of the best interests of those on main street rather than Wall Street.

Basic citizens still have a few rights although they’re disappearing faster than a stack of chips on a casino poker table. For those fortunate folks who haven’t been slammed by a job layoff this is about as good a time as there will be to invest in places where our friends in Washington can’t get their hands on your money, or at least not all of it.