The Federal Reserve's interest rate policy is an invisible tax that costs savers and
investors roughly $350 billion a year. This tax is stifling
consumption and may be causing more economic problems than it's solving.
That's the assessment of Todd E. Petzel, chief investment officer at Offit Capital Advisors, a private wealth management firm.
The cost to consumers doesn't stop there.
Despite the low rate, banks don't seem to be increasing their lending.
Savers and folks living on fixed incomes also are suffering, as are,
notes the paper, underfunded pensions and crippled endowments.
So just who is benefiting?
Uncle Sam, who otherwise would be paying higher rates on the deficit, increasing it even more.
And, of course, the banks are big winners.
But Petzel says a bit of a hike in interest rates would be good for several reasons.
It could help increase consumption and would reduce the appeal of higher-yielding and dicier investments that people have turned to as rates have dropped.
I know the hubby and I would be more inclined to visit our local stores -- I've wanted a new chair for our den for months -- if our short-term, liquid savings were earning more than a few measly dollars a month.
Unfortunately, neither the Fed nor the politicians on Capitol Hill who are beholden to the banks seem inclined to shift gears. The Fed Funds Rate has been at 0.25 percent for almost two years.
Petzel acknowledges that higher interest rates could cause some additional bank failures. "But saving a few more zombie enterprises with strong Washington voices at the expense of millions of savers' consumption may be missing the forest for the trees," he said.
What do you think? Is the almost zero percent rate good or bad for the U.S. economy? Have the low interest rates helped or hurt you personally?
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