“On the devastating long-term impact of the Federal Reserve’s zero-interest rate policy (ZIRP): with the real (i.e. adjusted for inflation) return on savings near zero (or even negative, for those who have to pay soaring rents, healthcare insurance premiums, college tuition, etc.), those saving for retirement are losing the Red Queen’s Race: no matter how much they save, the income will be too paltry to support retirement. This has three extremely negative consequences. Those seeking a return above zero are forced to put their savings at risk in boom-and-bust markets that tend to reward only those who get into the bubble expansion early and exit early. These boom-and-bust markets tend to savage the assets of the middle class when they blow up, but do little to rebuild these assets in the bubble expansion phase, as prudent investors who were burned in the previous bubble bust shun risk assets. The second negative consequence is the structural pressure on spending as those saving for retirement must sacrifice current spending to pile up capital to spend during retirement. No wonder the velocity of money is in free-fall–everyone hoping to retire on more than cat food has to set aside more of their earnings because they cannot count on any future earnings on capital. The third consequence is the destruction of middle class retirement. When a $500,000 nestegg earns a miserable $15,000 a year (3% annual yield), saving enough to generate a middle class income in retirement is beyond the reach of what’s left of the middle class.”

LINK HERE to the article

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