04 August 2010


We live in an upside-down country today where the prudent are penalized and the profligate are rewarded. The traditional wisdom about saving for a rainy day and retirement has virtually been abandoned by the government. By keeping interest rates so low for so long the Federal Reserve has been punishing savers while printing money to satisfy an omnivorous government, which can borrow for virtually nothing and continue to spend beyond its income putting the burden on future generations.

It is also harming the present older generation, particularly those at or near retirement. As one gets older the prudent thing to do is avoid riskier investments and keep money in safer places such as savings accounts. But with interest rates so low the yield is insufficient to provide an adequate income for most people. As a result in order to try and achieve returns that were projected years ago people continue to invest in riskier assets like stocks. Long term this can pay off, but perhaps not in time for retirees.

Policies currently in place basically steal from those who have done the right thing in favor of those who have been profligate or are dependent upon the government for support. This can only get worse down the road as soaring debt leads to hyperinflation and the value of money declines. Inflated currency over centuries has long been the government way to work out debts, which is basically theft from those who have put their trust in it. Thus savers lose either way, with either diminished asset value or low to no returns. The only beneficiaries are the government, all those connected to it financially, and the big banks, which are able to borrow for virtually nothing from the government and earn returns from debt instruments with little risk.

Thus what it cannot get through taxation the government takes anyway through other means. If we are to avoid being left poorer in the future the government must be limited. This means slashing spending, reducing bloated government payrolls, cutting taxes and an end to currency manipulation. It cannot happen too soon.

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