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Seniors and low rates: EconoMeter considers the pros and cons of Fed policy

Good and bad results from keeping rates near zero as economy struggles to recover


Sunday, February 12, 2012

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Kelly Cunningham, National University System
Answer: NO

The Fed’s low interest rate policy not only wreaks havoc on yield-dependent retirees and other savers, but ignores the collateral damage of unsustainable debt, rampant inflation, misallocated resources and credit, and devalued U.S. currency. By holding rates so low for so long, the Fed ignores Consumer Price Index inflation, currently rising above 3 percent. As long as interest rates remain below rates of inflation, the U.S. economy will not equitably restructure toward lasting recovery, and savers will continue to suffer from weakening currency values. The eventual correction will be that much more severe given the immense effort that only postpones it.