Monday, December 14, 2015

Lucy and the Football

That big tease--Federal Reserve Board Chairperson Janet Yellen--is back this week taunting us "savers" again.  For weeks now we have heard "The Fed has to raise interest rates this time!"  And so those of us with cash in reserve think we might finally see savings, CD and Money Market rates go above a measly one-percent for the first time in about seven years.

Well I'm not falling for it this time around.  Janet Yellen should change her name to "Lucy" and be sitting out on our front lawn holding a football and telling us that "this time I really will let you kick the ball, Charlie Brown!"  We've heard the promises before--but every meeting of the Fed results in a decision to "maintain current rates due to weakness in the economy".  In the past its been a downturn in the Stock Market, or weak hiring numbers, or high gas and energy prices, or the potential collapse of Democratic Socialist economies in Europe, or a recession in China.

Until this morning, everyone was confident this would be the month where rates are nudged up slightly.  But now there is concern about low commodity prices and a weak equities market--so the chance remains that money will remain cheap--and football will be pulled away from "savers" again.

Why don't we just admit that the new, new, new economy is predicated on Americans and their Government living far beyond their means?  We as a nation have reduced our personal debt levels by just 12% since the high point of 2008--during a time when borrowing money was cheaper than it had ever been before.  And if you listen to the 0% zealots, you would think the only solution to our economic malaise is to pile all of that debt right back on us.

Let's be honest, debt is a powerful political tool.  When people are in over their heads, they live in fear of that layoff notice or that entitlement program being cut.  Both sides of the political spectrum play to the fear by saying the other wants to take away those sources of income--leaving you without that house that you apparently couldn't afford in the first place.  Real ownership (clear of all debt) and self-funding for economic disaster is a very powerful thing--which lessens the impact fear-mongerers can conjure up on the campaign trail.  So saving is discouraged--and profligate spending is encouraged--to keep us in a well-entertained and toy-filled hole.

Perhaps Janet Yellen and her crew will stop teasing us this week and increase interest rates--setting us back on a course where savers are rewarded for their self-control--and those burning through their cash actually feel the impact.  Or we'll just have the football pulled away from us again.

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