Everyone knows that there is currently an $85 billion a month QE-3 (Quantitative Easing) program in place by the Federal Reserve. This policy was created to keep interest rates artificially low so that the stock market and the economy can inflate higher. The Federal Reserve also says that they have a dual mandate. The first mandate is to provide liquidity to the markets as a last resort lender. This was the case in 2008 when the credit markets were freezing up. The second part of the dual mandate is to promote maximum employment. Listed below are three reasons why Ben Bernanke and the Federal Reserve are killing old people.
1) Since December 2008, the Federal Reserve has lowered the fed funds rate to between zero and a quarter percent. The fed funds rate is the overnight lending rate to the large banks such as J.P. Morgan Chase & Co (NYSE:JPM), Bank of America Corp (NYSE:BAC), Citigroup Inc (NYSE:C), and Wells Fargo & Co (NYSE:WFC). You see, this free money to the four largest banks is the reason why you get basically no interest in a savings account. The elderly depend on getting interest from their savings accounts held at a bank. Meanwhile, a bank can lend out that savings account money and make much more interest from it than the individual can earn.
2) The elderly are not in a position to take on risk. The stock market has soared higher since the Federal Reserve began stimulating the economy via the low fed funds rate and the three quantitative easing programs. Anyone that knows anything about financial planning understands that most elderly people no longer have the earning power to invest in risky assets. What would the elderly do if the stock market crashed again like it did in 2000, and 2008?
3) Many elderly people will allocate more capital toward bonds as they get older. Bond yields are still historically low since the Federal Reserve implemented all of these easy money policies. Today, the yield on the 10-year U.S. Treasury Note is 2.50 percent. This yield cannot keep up with food inflation which seems to be steadily on the rise. Remember, the elderly do not care that i-pads and electronic devices are low, they are looking to survive and need the necessary goods for survival. We shall see how this political and economical drama plays out in the future. However, we can only hope that the repercussions of these actions do not have as dire effects as the writing on the wall dictates.