Low Interest Rates Start To Bite Savers


The NYT has a story that kind of states the obvious.

As ultra low interest rates persist, those that rely on interest income from savings are getting squeezed. They offer a quote from Pimco’s Bill Gross which neatly states the status quo:

“What the average citizen doesn’t explicitly understand is that a significant part of the government’s plan to repair the financial system and the economy is to pay savers nothing and allow damaged financial institutions to earn a nice, guaranteed spread,” said William H. Gross, co-chief investment officer of the Pacific Investment Management Company, or Pimco. “It’s capitalism, I guess, but it’s not to be applauded.”

Mr. Gross said he read his monthly portfolio statement twice because he could not believe that the line “Yield on cash” was 0.01 percent. At that rate, he said, it would take him 6,932 years to double his money.

What I’m sure has not been lost on the administration is that many of those who are suffering some degree of deprivation as a result of falling interest income are seniors. Many a politician has come to rue the day that he crossed that group.

Unintended consequences may be one of those phrases that needs to be retired from daily use for awhile but the reality of its existence is amply demonstrated here.

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