Federal Reserve Chairman Ben Bernanke announced that interest rates will not be raised until late 2014. Screwing seniors who depend on U.S. Treasury Bonds, CD’s, and money market accounts for their retirement income, for another two years.
Retirees who depend on bonds and CD’s, to provide income for their retirements, have already suffered through four years of artificially low interest rates. The Federal Reserve is promising retirees and seniors a total of six years of pain.
Why is Ben Bernanke and the Federal Reserve keeping interest rates artificially low? To save the banks. Remember, the Federal Reserve is literally the big banks, and acts in the interest of the big banks. If the Federal Reserve allows interest rates to naturally rise, the big banks are screwed, in two ways.
First, higher interest rates will crash the housing market, as mortgage payments and the cost of borrowing go up, and the value of the mortgage portfolios the banks hold go down. Secondly, higher interest rates will also cause the stock market to fall, and along with it the stock prices of the big banks. Potentially driving big banks and investment companies into insolvency and/or bankruptcy.
In effect, the Federal Reserve is bailing out banks on the backs of seniors, by keeping interest rates artificially low.
How does the Federal Reserve keep interest rates artificially low? It buys U.S. Treasury Bonds through a process known as Quantitative Easing QE, or in non-fed speak, it increases the quantity of dollars. The negative downside to this policy of Quantitative Easing is inflation. The price of commodities such as gas, food, cotton, metals, orange juice, goes up.
Creating a double squeeze on seniors and retirees. Not only do seniors receive less income from their bond holdings, a larger percentage of their reduced income, will be spent on gas and food.
What can you do to protect yourself from the Federal Reserve? Your options are limited to reducing your spending to offset the loss of income and higher prices, and/or, increasing your bond holding risk to increase your retirement income. Talk to your investment adviser, we don’t sell investments or give investment advice, about high yield corporate bond funds.
While the yield on a U.S. Treasury Bond is less than 1%, the yield on the Vanguard High Yield Corporate VWEHX is currently 7.13% The Federal Reserve is hell bent on screwing seniors and retirees to bailout the banks, however, there are steps seniors can take to mitigate the financial pain.
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1 response so far ↓
1 D. McCoy // Mar 7, 2012 at 3:05 am
Thank you for continuing to point out how Bernanke’s interminable low interest rate policies are destroying the financial planning of seniors who saved responsibly for their retirement years. There is only one word for what he is doing and that is, “criminal”. This country has truly gone upside down when those who lived prudently are expected to pay for the flagrant abuses of investment “bankers” and the foolish who agreed to purchase homes they could not afford in the first place. The costs to seniors go well beyond the financial. Stress related to having their retirement plans sabotaged by a Fed chairman who is indifferent to the struggles he has caused is also compromising both the physical and the emotional health of millions of retired citizens.
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