Posted on 03/27/2015 3:25:06 PM PDT by Citizen Zed
The Federal Reserve's efforts to stimulate the U.S. economy after the financial crisis ended up costing savers nearly half a trillion dollars in interest income, according to report released Thursday.
Since the central bank dropped interest rates to near zero at the end of 2008, savers have labored under plain-vanilla bank accounts and money market funds that have yielded close to nothing. Critics have long said the Fed's quantitative easing efforts have boosted asset prices, particularly in the stock market, but exacted severe costs across other parts of the economy.
In a landmark report, Swiss Re quantifies just how much savers and others have languished while the policy has pushed the Fed's balance sheet past the $4.5 trillion mark but failed to generate above-trend economic growth or substantial core inflation.
The reinsurance firm put the number at $470 billion in the 2008-13 period studied, so the number is likely even higher now.
Swiss Re called the impact of low-rate dollar-cheapening policies "indisputable. Meanwhile, the impact of foregone interest income for households and long-term investors has become substantial."
After more than six years of the zero interest rate policy, or ZIRP, the Fed is preparing its first steps this year toward normalizing rates. Most economists and market participants expect a rate hike at either the Fed's June or September meeting, though recent weak economic numbers post a quandary.
Financial markets have come to depend on the Fed's largess, which has included three rounds of bond buying that have expanded its balance sheet, plus another round called Operation Twist, in which it bought and sold securities at roughly the same level.
(Excerpt) Read more at cnbc.com ...
Ain’t that the truth.
I’ve got an engineering and a finance background. The ball to keep your eye on is “real interest rates,” i.e., the rate of return that one earns net of inflation. Also important for taxpayers is real interest after taxes.
The Fed stimulated the economy in part by keeping real interest rates negative (i.e., what you could earn less inflation was less than zero). This robs savers, and incentivizes them to take on more risk in a search to get some yield and to preserve their assets.
Very bad policy, IMHO, from a moral point of view—to loot savers to ameliorate the effects of a credit binge.
No kidding. I’ve been saying this for years.
Conservative savers have been helping bail out the those who wrecked the finaincial system for years, well before 2008, but it’s seldom mentioned for some reason.
and Wrecked the economy = costing Trillion$
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