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ill tell you that a hard question and to be honest i can argue it either way.
on one hand at 60 im in pretty good financial shape thanks to decades of investing,planning and LUCK!.
im glad i know where i stand in that respect.
so for the above reasons im glad im coming up on retirement age.
i was i had 20 years to go on the other hand because retiring into this uincertainty and pulling the plug in times the financial retirement calculators call the 10% failure rate scares me.
at least if rates were around the historical norm of 6-7% if markets fell i15% i could be whole again in 2 years. today it would take 300 years to get even again in a money market or bank..
My wife and I are also in excellent financial condition due to lots of hard work. But there are still my friends who are in bad shape and without any hope that their principle will last 25+ years as all of those charts use to suggest if you simply pull out 4% a year. Without the interest that is due to retirees, it is going to get very ugly. You have to do the math. And no investment will save anyone unless he/she is very lucky. The odds are against any investment saving principle in this environment.
My friend who is 64 has no idea how he is going to survive. I guess he could move in with his children if they ever get jobs. I offered to give him housing if he ever needs a roof. How many people will I have to help out as I get older? How long are retirees going to allow their savings to be demolished in order to save some bankers who are taking home tens of millions of dollars in bonuses. It is a cunning game that is being played. Have retirees enough life experience to understand what is happening to them and how it is being accomplished?
Raising rates now puts money back into the pockets of people who can then begin to spend again and create demand. What we have now is essentially a 100% tax on savings. An incredible tax that only suppresses potential demand. Coupled with less money printing, the economy would see less inflation (witness how oil begins to decline as the possibility of QE3 ebbs), and altogether higher standard of living.
This is one of the strangest things I've heard in a long time. Raising interest rates would devastate thousands of small businesses and professional people who are managing to hang on in a bad economy only because they can make low payments on the loans they've taken out right now. You want to increase the unemployment rate? Raise interest rates. Stop the small number of people who are buying homes right now from entering the market. Shut off credit to small businesses who won't be able to afford a loan. This is a prescription for disaster.
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Low interest rates, helps one class and only one class of people: the people who can borrow at 0% (banks and large hedge funds) who are not creating demand but instead are either speculating or making money on the carry trade (i.e. buying back 2% treasuries with 0% borrowed money). It is a ludicrous economy. Everyone else is just trying to survive.
They help ME out. I'm not retired yet, but I'm in my fifties and borrowing money for homes, cars, and occasionally to meet my payroll at the office. Low interest rates are one of the few things that is actually good about this economy right now. I guess if you are a retired person trying to get by on fixed interest rates from some bond or security its a pain in the butt to realize how low your income has gotten. However, retirees are simply one group in this whole country.
I personally think many retirees ought to put off retirement to about age 70 and than the need for watching savings and investments so carefully might not be such a pressing need since there will be fewer years to cover. However, most of the country seems to act like it has a God-given right to retire at age 60 anymore. That's a social problem that needs to be addressed. People who have life expectancies of greater than eighty years have to realize that the benefits for those additional years of retirement have to come from somewhere. They don't come from Santa Claus.
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Retirees in particular should be ultra-sensitive to this issue since there is no way principle will last 25+ years with zero percent interest as has been in the case of Japan which has been doing the exact same thing for over two decades.
I'm sorry about the situation retirees find themselves in. However, private investing has always involved risk. Always has and always will. Its just the nature of the beast. I'm all for trying to find some solutions to these problems. However, there are too many retirees who seem fixated on their problems and oblivious to the fact that low interest rates are a necessity right now for a struggling economy. Actually, if the economy doesn't recover no one's retirement will be safe, so retirees have an interest in seeing that all the generations get back on their feet too. Too many can't see or refuse to see that bigger picture.
I'm sorry. The concept of providing low interest loans to people who eventually don't pay back the loans because they can't afford them has been tried. It has led to a devastating Depression in Spain, Greece, Italy and is now bringing down China and India as well as South American countries like Brazil and Argentina. In the U.S. it has wiped out the equity of millions of home owners including many retirees. It is leading to a worldwide Depression. Basically what has happened is that countries have followed the prescription that you are recommending to a point that the country can no longer produce enough to pay the interest on the money that they borrowed, so they are bankrupt. At some point, at this rate, we will all get there. We have already borrowed a total that is more than 3X our GNP.
It is a terrible idea that is gradually destroying every world economy ... and you are suggesting that we keep doing it because a certain segment of our society has never figured out how to live without borrowing money. Well, if they have to borrow then you should be borrowing at the rates that don't require retirees to sacrifice their savings in order to support people whose life's desires can't be satisfied by the money they earn. But at least you get the point. Retirees should have to keep working to 70 so people who love to spend money can keep borrowing at low rates. This is what retirees should be lobbying against.
The problem is we have too many people living by borrowing (cheap loans, credit cards) beyond their means. Which is a mirror of our country which has successfully amassed $15 trillion in debt at the national level and an unimaginable total household, state, and national debt of over $50 trillion, most of which will never be paid back. Care to guess who is going to pay for all of this: yes, everyone will work until they die. Nice topic for a retirement forum.
In many ways your position is the same as France while mine is similar to Germany's. You are proposing that people who can't afford it be given more and more cheap loans (France) and Germany, which has managed a solvent economy, should pay for it. Are you OK telling retirees that they have to keep working to 70 and beyond so that you can keep borrowing?
My wife and I are also in excellent financial condition due to lots of hard work. But there are still my friends who are in bad shape and without any hope that their principle will last 25+ years as all of those charts use to suggest if you simply pull out 4% a year. Without the interest that is due to retirees, it is going to get very ugly. You have to do the math. And no investment will save anyone unless he/she is very lucky. The odds are against any investment saving principle in this environment.
My friend who is 64 has no idea how he is going to survive. I guess he could move in with his children if they ever get jobs. I offered to give him housing if he ever needs a roof. How many people will I have to help out as I get older? How long are retirees going to allow their savings to be demolished in order to save some bankers who are taking home tens of millions of dollars in bonuses. It is a cunning game that is being played. Have retirees enough life experience to understand what is happening to them and how it is being accomplished?
Its not to save some banker's ;they paid that back with interest. The FEDE lowers rates to prepace liquidity i the system form people holdig on to cash and not speand it. Its stops defaltion which is just as serious a problem as inflation. They raise rates to fight infaltio which isn't the probelm now. The only chpoice is the markets butthat has risk which is where banks get the money to pay interest .Look at borrowig rates for houses;cars etc asnd you see that it is meant to promote spending in a slow economy.Veryone is holdig cash that can from main street to wall street see masive debt facing us in future.There is balme enough to go around as to how we got in thsi mess from those who borrowed what they couldn't pay;to cnogress that promoted it for decades;to lenders who made the loans;to savers who like it to keep on because its got them big profits from accounts.Most love a bubble when it going;then screams when it burst.
Its not to save some banker's ;they paid that back with interest. The FEDE lowers rates to prepace liquidity i the system form people holdig on to cash and not speand it. Its stops defaltion which is just as serious a problem as inflation. They raise rates to fight infaltio which isn't the probelm now. The only chpoice is the markets butthat has risk which is where banks get the money to pay interest .Look at borrowig rates for houses;cars etc asnd you see that it is meant to promote spending in a slow economy.Veryone is holdig cash that can from main street to wall street see masive debt facing us in future.There is balme enough to go around as to how we got in thsi mess from those who borrowed what they couldn't pay;to cnogress that promoted it for decades;to lenders who made the loans;to savers who like it to keep on because its got them big profits from accounts.Most love a bubble when it going;then screams when it burst.
There is a ton of liquidity in the system, both dollars and Euros. Trillions of dollars are sitting in bank reserves. But none of it is being lent out. Why? Because bankers rather make an easy profit with a carry trade or speculate on derivatives rather than make loans. My friend and his wife have two incomes, steady jobs, and are willing to put 40% down on a home and have been trying since February to get a modest loan for a house.
Lowering rates and printing money was necessary for one and only one reason. Trillions of dollars in loans went sour. So the Feds bailed out the bankers and continue to bail them out by giving them loans at a rate that is less than they can receive on Treasuries. Even I can make billions of dollars in profits if the Fed gave me an unlimited supply of money at 0% so that I can invest it in Treasuries at 2%. And guess who is paying the 2%? The taxpayers. It is a gift.
Ultimately this Ponzi scheme has to fail when the debt gets so large that taxpayers can no longer service the debt. It happened in Iceland (the country went broke), and it happened in Greece (they are broke) and it is now happening in every country (including the U.S.) save Germany, who is this case is the only country that is actually running a surplus. An economy that is based upon borrowing and debasing currency in order to pay for the borrowing is eventually going to fail. Here is a cute article from Forbes titled:
Unfortunately, it is not an hyperbole. And it is the advocates of loose money and loose lending/borrowing that has gotten us to this point. Our country is insolvent and we are wringing the last of our assets right out of retiree's savings. It is not sad. It is reality and I have to think about how I am going to help my son and my friends.
ill bet there is a reason your friend and his wife cant get a loan. my son got one when he was on unemployment for 500k.....
he does have some money in the bank so that helped but there was no bank he went to that would not give him a mortgage for such a huge amount while on unemployment.
heres the flaw in your logic :
if the fed is artificially holding down short term rates which they control then why is it that investors all around the globe are keeping longer term rates so low which is not controlled by the fed?
investors never follow the feds lead unless they see low rates as warranted and inflation not a problem. in fact they are fearing a deflation ..
right before the big downturn the fed was raising rates while the worlds investors didnt see it that way and they bid longer term rates down. the bond market smelled trouble out on the horizon.
thats how we got the now famous inverted yield curve where short term rates were higher than long term rates.
since the fed uses the great depression as a model and they are flooding the system with as much liquidity as they can and thats why rates are so low.
none of us here have a good enough knowledge to draw any conclusion about whether it works or doesnt work. i wont for 1 second think i know all the details of the inner working of our money system.
its like taking medicine when your sick and never knowing if you avoided more serious issues or death from the medicine or just on your own .
there is no question things are a whole lot less bad then in 2008 when we stood on collapse. whether its the feds actions or not i really dont care,the fact is we are recovering .
Last edited by mathjak107; 05-24-2012 at 04:09 AM..
ill bet there is a reason your friend and his wife cant get a loan. my son got one when he was on unemployment for 500k.....
he does have some money in the bank so that helped but there was no bank he went to that would not give him a mortgage for such a huge amount while on unemployment.
heres the flaw in your logic :
if the fed is artificially holding down short term rates which they control then why is it that investors all around the globe are keeping longer term rates so low which is not controlled by the fed?
investors never follow the feds lead unless they see low rates as warranted and inflation not a problem. in fact they are fearing a deflation ..
right before the big downturn the fed was raising rates while the worlds investors didnt see it that way and they bid longer term rates down. the bond market smelled trouble out on the horizon.
thats how we got the now famous inverted yield curve where short term rates were higher than long term rates.
since the fed uses the great depression as a model and they are flooding the system with as much liquidity as they can and thats why rates are so low.
none of us here have a good enough knowledge to draw any conclusion about whether it works or doesnt work. i wont for 1 second think i know all the details of the inner working of our money system.
its like taking medicine when your sick and never knowing if you avoided more serious issues or death from the medicine or just on your own .
there is no question things are a whole lot less bad then in 2008 when we stood on collapse. whether its the feds actions or not i really dont care,the fact is we are recovering .
We are recovering by any measure. The problem is that the recovery is a long, slow, and tedious one. Its a time that is testing the patience of many of our countrymen. When I read some of the posts that I do on CDF advocating radical solutions to our economic problems, I realize just how much this recession is hurting portions of our country. Yet, I think the best solution is to stick with the policies in place and be patient. Not only have we eliminated the threat of total collapse of our financial system which was actually a concern back in 2008, we have experienced a growth in GDP and jobs. The recovery would probably be faster except for the fact that Europe is going through a lot of trouble of its own with Greece and now perhaps Spain and Portugal. All of these forces cannot help, but put some drag on our own economy. Its drag that is not of our own doing. What I really worry about is that China too, maybe sliding into a recession. If that is the case, deflationary pressures may become extreme.
The worst thing we do right now would be to either raise interest rates or to undertake some mammoth effort to cut government spending. Both actions are bound to increase unemployment and slow growth further. Our long term goal has to be decrease our deficit and deal with our rapidly growing "entitlement programs". I don't like all the debt we have created at all. However, the low interest rates being paid for a ten year treasury bill indicate that we are not having a problem borrowing money to pay for our spending.
Its unfortunate, but seniors and others are going to have to contend with low interest rates as they plan out their retirements for years to come. The alternatives for our entire economy are simply worse.
ill bet there is a reason your friend and his wife cant get a loan. my son got one when he was on unemployment for 500k.....
You have to be kidding. A person on unemployment is being given a loan!! This kind of stuff is what destroyed our economy in the first place!! Putting aside the ridiculous nature of this particular loan, my friend still is trying to get his.
heres the flaw in your logic :
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if the fed is artificially holding down short term rates which they control then why is it that investors all around the globe are keeping longer term rates so low which is not controlled by the fed?
This is very complicated to explain, but essentially, what was happening all around the globe was that money from the U.S. was being exported all around the globe, where ever there was higher rates (e.g. Brazil) creating an enormous amount of inflation. The Fed was exporting inflation all around the world thereby quickening the disastrous situation the world is experiencing. In China and India, for example, workers where not experiencing any wage inflation (because of government policies) while experiencing horrendous inflation. All of this is covered by world economic magazines such as the Economist.
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since the fed uses the great depression as a model and they are flooding the system with as much liquidity as they can and thats why rates are so low.
Bernanke is a robot and only knows how to print money which devalues any savings. He is known as a hatchet man and will do anything to please whoever is giving him orders. He is certainly no Volcker.
What is happening is quite simple and does not have to be obscured by any thesis on the subject. Money printing has been tried throughout history and has ALWAYS ultimately failed with dire results. Recently Sheila Bair, former FDIC chairman, wrote a scathing sarcastic op-ed piece about the stupidity of these policies.
If the money was spread out equally it would do absolutely nothing. But since it is being given to the wealthiest in the form of ultra-cheap loans, it is merely transferring wealth to the wealthiest. That is all. Meanwhile, the U.S is experiencing the smallest amount of labor participation rate in its history. Do you think it is time stop these policies that is destroying our labor force, our economy and our society?
Huh? Worst labor participation rate in history? Real wages declining? Real wealth continues to decline for every class except the top 1%. Depression/recession in Europe caused by the reflation (money printing) activities of the ECB and Feds? World wide stock market Bear market (check what is happening around the world) and soon to hit the U.S. Even China is going down.
This so called recovery in the U.S. is just the Feds pulling money from the savings accounts of retirees (and other savers) and giving it away to borrowers. At some point the savings accounts are empty. Then what? A year from now, who are you going to blame as the European recession hits our shores. Are you going to blame yourself for supporting policies that transfers wealth from retirees to the very rich?
Its not to save some banker's ;they paid that back with interest.
They paid it back with the money that the Fed printed for them and the interest that they didn't pay to any savers. Retirees were hit with the double whammy of higher commodity prices caused by money printing and zero interest on savings. The Fed is literally sending retirees into poverty (the number of retirees at or near poverty level is 23% and growing at and alarming rate) to save the bankers (and their multi-million dollar bonuses. The whole system is designed to make banks rich. Do you know why? The bankers are the ones who sit on the Board. Literally.
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