The US Economy Is Still In The High-Danger Zone

I hate being the bearer of bad news.

I remember the one and only time in my life I agreed to umpire a Little League game behind the plate. My youngest son was on the mound, and his older brother came to bat. The count went to 3-2, and I realized I had a huge knot in my stomach.

I said to myself, “God, please let him swing and hit the ball!” And he did. I don’t even recall where it went; I was just thankful I didn’t have to make a call that would have meant bad news for one of them.

Calling it the way you see it may be a good way to live your life, but it isn’t always fun.

I have been harping on the Federal Reserve policy of artificially keeping down interest rates since it started over five years ago.

Nothing has changed; in fact, you could make the case that things have gotten worse. Although there are rumors that the Fed may end QE in September or October of this year, I am not holding my breath. Right now, they are still flooding the banking system with billions of dollars per month, and finally the baby boomers—10,000 of whom are turning 65 every day now, for the next 16 years—are starting to understand what we already know.

Low Interest Rates Are Killing Savers…

In a recent Bloomberg article, Bill Gross of PIMCO (the world’s biggest bond fund) calls the minimal returns that savers and income investors have seen from bank deposits and fixed-income securities a “financial repression.”

“I hate to be gloomy,” said 69-year-old billionaire Gross, “but, yes, for the next 10 years, the oldsters, and I’m in that camp, are going to be disappointed in terms of the policy rate.”

Former President of the Atlanta Fed William Ford chimed in, saying that current low US Treasury yields reduce conservative investors’ income by at least $280 billion annually.

“The costs of low interest rates are being ignored,” Ford said. “It is killing savers, elderly savers who are living on life savings that have been conservatively invested.”

Can it get any more depressing?

Yes: according to the Department of Labor, due to lack of yield from savings and investments, workers 65 and older are the only group of Americans who are increasingly employed or looking for jobs.