September 14, 2012

A DEFLATIONARY EPOCH HAS TO RENDER LOW RATES:

As Low Rates Depress Savers, Governments Reap Benefits (CATHERINE RAMPELL, 9/10/12, NY Times)

A consumer complaint is ricocheting around the world: low interest rates are eating away at savings.

Bill Taren, a retiree near Orlando, Fla., discovered in August that his credit union would pay only 0.4 percent annual interest on his saving account, even though inflation averaged 2.8 percent over the last year. So he and his wife decided to just stuff their money in the mattress, he says, because at least there "we can see the cash when we want."

Jeanne and André Bussière, in Annecy, France, have a stable pension and a bank account that pays 2 percent interest -- "almost nothing," they say -- even though the consumer price index rose an average of 2.5 percent over the last year.

Jiang Rong, an information technology professional in Xiamen, China, decided to dive back into the speculative real estate market rather than watch his savings wither at the bank. In China, too, the cost of living is outrunning savings, as local restaurants nearly double their prices.

The fact that interest yields are so low in so many parts of the world is no coincidence.

It's just a function of globalization and technology.
Posted by at September 14, 2012 5:05 AM
  

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