No solutions. Just concern.
[Savers are] not getting a livable return on nest eggs they've built up over a lifetime, and it's sad. It's also a situation that ought to concern us all.
(Editorial, "Scary little numbers: For savers on fixed incomes, low rates of return on their nest eggs are frightening," Houston Chronicle, August 25, 2010)
Read the editorial. It identifies a legitimate economic and financial issue, which is the next-to-zero interest rates available in the market for retail investors, a particularly acute problem for the subset of investors known as savers on fixed incomes.
So why has this occurred? And what should be done about it?
The Chronicle's answers? The newspaper offers next to nothing on the first question. And for the second, moist "concern," which is to say, we should all huddle together and weep.
This policy of pointlessness is nothing new.
"Concern" is the Chronicle's answer to all legitimate economic and fiscal problems, most famously the obscene deficits being run up by the triumver of President Obama, House Speaker Pelosi, and Majority Leader Reid. Here's an earlier post by Unca D on an editorial on using taxpayer money to bail out improvident borrowers.
The editoral ends with the usual response of the Chronicle when it flirts with fiscal and financial sanity -- the limp argument that something really, really ought to be done.
Long-term resolution of this problem rests on our commitment to make certain this ill-starred situation never comes again.
Great.
How? Commitment to do what?
The Chronicle seems to have one editorialist . . . who is occasionally permitted to say a few words about issues that matter. In December, for instance, he called the federal deficit and debt an "abyss."
But while Dr. Rightmind is allowed to diagnose patients, he never, ever writes a prescription.
The Chronicle uses that same tactic in its recent editorial about low interest rates.
So why are the rates so low?
"Mostly a market function," the Chronicle suggests, though "heavily influenced by economy policymakers [read policy makers]."
Okay. What the heck does that mean? If it's the market, why is it driving rates down? If it's policy makers, why again?
Here's the real reason. Low interest rates are deliberate policy of the United States of America. And that policy is heartily endorsed by the administration the Chronicle helped foist upon us. If interest rates were to rise, the horrific dimensions of the Obama deficits would be exposed sooner rather than, as now, later.
Furthermore, high interest rates would seriously annoy the Chinese and imperil their continued willingness to bankroll the One's deficits. Why? Because when interest rates go up, the value of existing debt instruments -- bonds, for instance -- in the hands of investors go down. The Chinese, who buy U.S. debt for stability, would not be amused to see the value of their investments go south -- the equivalent, financially if not legally, of a partial default.
By constrast, ever-lower interest rates have actually increased the value of the Chinese holdings and those of other bond investors.
Low, low, low rates, in short, are a political necessity for the profligate administration and for continuing to do ever more of the good works the Chronicle wishes to do with other people's money -- namely with money borrowed from the Chinese and charged off to our children and grandchildren.
Too bad for savers. They're collateral damage, subject to a hidden tax on their income for the greater good.
[The] Fed has maintained its nearly zero interest rate target for 20 months, while expanding its balance sheet by some $2 trillion. By any definition this is historically easy monetary policy, and not without costs of its own. Zero interest rates punish savers, who in turn can create new economic distortions as they desperately search for higher yield. Zero rates also favor government borrowers, which can finance their deficits at historically cheap rates, over private investors.
. . . .
Above all, the easy money solution misdiagnoses the real U.S. problem. The economy doesn't suffer from a shortage of money. It is suffering from a shortage of confidence and animal spirits. Banks have plenty of reserves to lend, while U.S. corporations have repaired their balance sheets enough that they have something close to $2 trillion on hand. Even the U.S. consumer is saving more. The problem is that most Americans won't invest more or take more risks amid Washington policies that are hostile to private markets and have created only greater uncertainty and higher costs for doing business.
(Editorial, "The False Fed Savior," Wall Street Journal, August 10, 2010)
It's unseemly, frankly, for the Chronicle to howl on Sunday through Friday for more government spending -- spening that kneecaps our economy and, indirectly, robs frugal savers -- then show up on Saturday in funereal black, sporting a long face, and weeping loudly with "concern" about problems it helped create.
* * *
More examples from the edge of the "abyss," from the unserious Nick Anderson, from Davos, and from Greece (Unca D's all-time greatest takedown of the Chronicle's economic illiteracy).
UPDATE: As if to prove my point, the Chronicle on September 9 ran an editorial on whether it is better to rent or own a house. The Chronicle's answer, of course, is yes.
This debate seems healthy and important to us. It deserves informed and thoughtful attention from policy wonks and the public alike.
(Editorial, "Home, sweet home? A debate over the benefits of home ownership challenges conventional wisdom," Houston Chronicle, September 9, 2010)
Sure. But what's the answer?
Comments