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Old 05-23-2012, 09:28 AM
 
Location: Chicagoland
898 posts, read 612,491 times
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Quote:
Originally Posted by richrf View Post
Retired people do share some common interests, such as dependency on savings (they are retired). Current Federal Reserve policies (zero interest rates on savings) is essentially a massive transfer of wealth from retirees to the large banks who benefit from zero interest rates (as I describe above). This is a common issue no matter where you live or how much savings a retired family might have.
Higher interest rates will also dampen the economy in many ways which affects everyone including retirees. Many retirees hold bond funds in their portfolios, which will be hurt when interest rates rise - indeed for those holding more bonds than cash equivalents, the net effect will arguably be more harmful than leaving Fed rates alone for now. Higher interest rates also mean higher loan rates, which dampen auto sales, business loans/capital investment, and home buying (already severely depressed) which only lengthens the already anemic recovery. Higher interest rates increase deficits as government bond yields have to increase. Just to name a few...

Your (narrow) view on behalf of retirees relying on cash savings is largely what's wrong with legislation and policy these days. Legislation should be based on what's best for everyone affected (yes, that involves tradeoffs), not one group or another. AARP alone has done enough damage on "behalf of retirees" IMO. Until campaign finance/special interests/lobbying are eliminated or brought under control, we'll continue to see distortions from anything resembling "fair."
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Old 05-23-2012, 09:42 AM
 
Location: Chicago
1,124 posts, read 758,401 times
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Quote:
Originally Posted by Midpack View Post
Higher interest rates will also dampen the economy in many ways which affects everyone including retirees. Many retirees hold bond funds in their portfolios, which will be hurt when interest rates rise - indeed for those holding more bonds than cash equivalents, the net effect will arguably be more harmful than leaving Fed rates alone for now. Higher interest rates also mean higher loan rates, which dampen auto sales, business loans/capital investment, and home buying (already severely depressed) which only lengthens the already anemic recovery. Higher interest rates increase deficits as government bond yields have to increase. Just to name a few...

Your (narrow) view on behalf of retirees relying on cash savings is largely what's wrong with legislation and policy these days. Legislation should be based on what's best for everyone affected (yes, that involves tradeoffs), not one group or another. AARP alone has done enough damage on "behalf of retirees" IMO. Until campaign finance/special interests/lobbying are eliminated or brought under control, we'll continue to see distortions from anything resembling "fair."
As I said, artificially low interest rates is an insidious form of transfer of wealth from savers to borrowers. In the long run it creates economic disaster) as we are now experiencing since it shifts wealth to speculators, gamblers, and people who do not have the ability to ever pay back the loans (e.g. the housing bubble, the student loan bubble, the stock market bubble caused by excessive leveraging on cheap money). In the short run, it is also devastates the economy since it removes buying power from those who are suppose to earn income on their savings. It is the ultimate form of 110% tax on savers. A grand distortion that benefits only a very small percentage of the population.
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Old 05-23-2012, 09:48 AM
 
Location: Chicagoland
898 posts, read 612,491 times
Reputation: 711
Quote:
Originally Posted by richrf View Post
As I said, artificially low interest rates is an insidious form of transfer of wealth from savers to borrowers. In the long run it creates economic disaster) as we are now experiencing since it shifts wealth to speculators, gamblers, and people who do not have the ability to ever pay back the loans (e.g. the housing bubble, the student loan bubble, the stock market bubble caused by excessive leveraging on cheap money). In the short run, it is also devastates the economy since it removes buying power from those who are suppose to earn income on their savings. It is the ultimate form of 110% tax on savers. A grand distortion that benefits only a very small percentage of the population.
Understood. Care to comment on the impact of higher interest rates on
  • bond funds (largely held by retirees, probably a higher % than savings/cash equivalents),
  • on all loan based activities (affecting the broad economy and thereby everyone including retirees),
  • deficit increases (affecting everyone including retirees) and/or
  • the wisdom of legislation targeting segments of the population (savers in your example)?
Again, as a retiree I understand the frustration with low interest rates, but increasing Fed fund rates doesn't happen in a vaccuum.

As to your focus area, while your argument has merits, banks are going to maintain their spreads and speculation will go on until regulatory changes are made. Higher interest rates aren't going to address speculation or low capital reserves. Ironically, banking/financial services lobbying helped bring us the meltdown you're complaining about...let's address that maybe?

Last edited by Midpack; 05-23-2012 at 09:56 AM..
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Old 05-23-2012, 10:10 AM
 
Location: Chicago
1,124 posts, read 758,401 times
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Higher interest rates, on a macro level, will simply put money back into the pockets of people who invest wisely as oppose to speculating (cheap money encourages speculation). All of the problems we currently have could have been avoided if cheap money was not available under Greenspan/Bernanke. Any attempts to maintain this distorted economy only results in a far more calamitous ending as Greece is now experiencing as will Spain, Portugal, Italy soon will. My guess is that the Chinese cheap money experiment is also ending in a very bad way and once China ceases to fund our cheap money (we can never pay back the $15 trillion we now owe), then our situation will decay rapidly.

Extraordinarily distorted policies that only benefit a very few speculators in our society (who like to bet hundreds of billions of dollars on some obscure derivatives) should never be encouraged, should be ended as soon as possible, and if not then will lead to the same results we have already experienced twice before in a single decade (the disastrous conclusions to the housing and stock bubble). The next bubble to burst will be the bond bubble and that will be the granddaddy of them all (similar to what is happening in Europe for exactly the same reasons).

BTW, I totally agree that it is the banking regulation policies that brought this all upon us, but this is not surprising since the bankers control the money, thereby control the government most especially the Federal Reserve which is managed by bankers and all of a sudden holds $3 trillion dollars of junk securities that it bought from the banks that made all of those disgraceful home loans.

A lobbying group for the retirees should highlight all of these issues so that retirees understand that their savings are being destroyed in order to save disgraceful loans by banks that they are still doing to this day.
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Old 05-23-2012, 10:34 AM
 
Location: Chicagoland
898 posts, read 612,491 times
Reputation: 711
Quote:
Originally Posted by Midpack View Post
As to your focus area, while your argument has merits, banks are going to maintain their spreads and speculation will go on until regulatory changes are made. Higher interest rates aren't going to address speculation or low capital reserves. Ironically, banking/financial services lobbying helped bring us the meltdown you're complaining about...let's address that maybe?
Quote:
Originally Posted by richrf View Post
A lobbying group for the retirees should highlight all of these issues so that retirees understand that their savings are being destroyed in order to save disgraceful loans by banks that they are still doing to this day.
We agree to disagree. Everything you mentioned in your post is widely known, and yet nothing seems to change. And I still think you're looking at one side of the impact of higher interest rates (in itself accurate enough) without acknowledging the complete consequences.

I'd rather see the effort put into reducing the overwhelming influence of the financial and other sectors lobbying/special interests/campaign contributions that brought us to where we are than to fund "counter lobbying" efforts. I'm convinced all the talk of other admittedly important issues pale in comparison.

In that we all provide the revenue for the big institutions by buying products & services, we ultimately pay for the lobbying that often works against our collective interests. We should pour more funds into both sides of a debate without controlling either message at all? Just perpetuates the status quo that got us here...
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Old 05-23-2012, 10:54 AM
 
Location: CHicago, United States
6,937 posts, read 3,566,494 times
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Quote:
Originally Posted by richrf View Post
A lobbying group for the retirees should highlight all of these issues so that retirees understand that their savings are being destroyed in order to save disgraceful loans by banks that they are still doing to this day.
No, one organization's efforts will be all-encompasing on every issue. And there is no, one organization that will ever speak for all retirees. There are many and they tend to represent the interests expressed by their memberships. Seniors specific, veterans, fraternal, labor, etc. People who are interested in general or specific issues should join the organization(s) and work hard to advance their ideas so that they're a priority. You have priorities which are likely to be different from other members of organizations. That's true in any organization, representing any group of people. I sense you're looking for a Utopian solution to the questions. Of which there is none. But, just as the commercials for the lottery tell us, "You can't win if you don't play." Participation beyond web forum discussions is what's necessary. Talk is cheap.
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Old 05-23-2012, 10:57 AM
 
Location: Chicago
1,124 posts, read 758,401 times
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Quote:
Originally Posted by Midpack View Post
We agree to disagree. Everything you mentioned in your post is widely known, and yet nothing seems to change.
Nothing changes because the banks literally sit on the Federal Reserve Board and manipulate the availability of funds to suit their own interests. It is incredible that a completely unelected body of a few bankers (this includes the ECB) can purchase trillions of dollars in bad assets from private banks and put taxpayers (including retirees) at risk and to the detriment of everyone except the few who benefit from the wholesale transfer of wealth.

In order to change this, people have to get together and elect people change the laws that give the Federal Reserve such limitless powers.

No, I have not ignored the issues you mentioned. It is just that it is impossible to micro manage economic activity. The few dollars that some people may have gained in some appreciation in bonds is overwhelmed by the trillions upon trillions lost (probably over $30 trillion) in home equity value which was induced by speculative overbuilding.

The stock market or bond market vacillations are a distraction from the whole destruction of wealth of the middle and lower strata of our society. There is only a very, very small group that has seen wealth accumulation over the last two decades and they are all pretty close to the management of banks. Should we be surprised that the Federal Reserve acts to benefit its own member banks?
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Old 05-23-2012, 12:26 PM
 
Location: Chicagoland
898 posts, read 612,491 times
Reputation: 711
To some extent we're in heated agreement, in others fundamental ways not. You realize lobbyists and politicians are ultimately spending your money. Beyond this, I'm done with this thread. I agree with posts above recommending supporting your views on specific issues, there's no common view for retirees, including what to do about interest rates.
Quote:
Originally Posted by richrf View Post
Nothing changes because the banks literally sit on the Federal Reserve Board and manipulate the availability of funds to suit their own interests. It is incredible that a completely unelected body of a few bankers (this includes the ECB) can purchase trillions of dollars in bad assets from private banks and put taxpayers (including retirees) at risk and to the detriment of everyone except the few who benefit from the wholesale transfer of wealth. So no one else benefits from low interest rates?

In order to change this, people have to get together and elect people change the laws that give the Federal Reserve such limitless powers.

No, I have not ignored the issues you mentioned. It is just that it is impossible to micro manage economic activity. The few dollars that some people may have gained in some appreciation in bonds is overwhelmed by the trillions upon trillions lost (probably over $30 trillion) in home equity value which was induced by speculative overbuilding. The trillions lost in housing caused massive damage and we can argue about preventing a recurrence, another subject. How does increasing interest rates today help that?

The stock market or bond market vacillations are a distraction from the whole destruction of wealth of the middle and lower strata of our society. Again, I think you're underestimating the bond fund holdings of retirees, I'd bet they exceed the cash holdings of retirees. When interest rates rise, bond fund NAVs will adjust accordingly and it will be especially painful for longer duration funds. At the moment bond funds provide retirees (and others) some yield, that's why fewer retirees (and others) are holding as much in cash/savings. There are alternatives.

There is only a very, very small group that has seen wealth accumulation over the last two decades and they are all pretty close to the management of banks. Should we be surprised that the Federal Reserve acts to benefit its own member banks?
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Old 05-23-2012, 12:41 PM
 
Location: Chicago
1,124 posts, read 758,401 times
Reputation: 407
If there is any segment of the population that is being exceptionally punished by the policies that have been embraced by past and current administrations, it is the retired class which sits by passively as their wealth is being transferred to other parties. Retirees, unlike other segments of the population, have almost no way of replenishing their savings, once their principle is reduced or extinguished (they are retired). It is amazing to me that retirees just sit by and allow this to happen. Maybe the political parties believe that retirees are too passive and unable to do anything to defend their situation. Maybe they are?
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Old 05-23-2012, 03:34 PM
 
Location: Chicagoland
898 posts, read 612,491 times
Reputation: 711
Quote:
Originally Posted by richrf View Post
If there is any segment of the population that is being exceptionally punished by the policies that have been embraced by past and current administrations, it is the retired class which sits by passively as their wealth is being transferred to other parties. Retirees, unlike other segments of the population, have almost no way of replenishing their savings, once their principle is reduced or extinguished (they are retired). It is amazing to me that retirees just sit by and allow this to happen. Maybe the political parties believe that retirees are too passive and unable to do anything to defend their situation. Maybe they are?
Seriously?
  • Recent college grads with large debts and few job prospects,
  • the vast middle class whose jobs have permanently gone offshore (whole industries will never come back),
  • most private sector workers who will never have employer provided pensions and/or subsidized retired health insurance like earlier generations, and public sector workers are starting to face the same fate,
  • construction workers who may never find employment in that industry again for a decade or so,
  • the millions of homeowners who have been (or may still) face home foreclosure,
  • several unemployed minorities,...
might disagree, just to name a few off the top of my head.

More divisive suggestions like yours are hardly a solution to the polarization that continues to paralyze our political leaders and the electorate as well.

Tell you what, start a poll and ask current retirees if they'd rather be 20, 30 or 40 years old right now facing the economic/financial outlook ahead instead of whatever retired age they are...
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