One of the most important components of interest rates for the middle class in America, is that since Alan Greenspan lowered interest rates back in 2001, nearly fifteen years ago we have experienced an entirely “lost decade” of economic growth, that only seemed like economic growth because of inflation. In regards to the middle class, the vast majority of people in this category are not particularly adept at investing. When interest rates are at regular levels, middle class people are far more inclined to keep their money in the bank than they are to invest.
When interest rates are low and inflation occurs, savers (people who keep their money in the bank) are penalized under these conditions. If inflation is at 2% and interest rates are near zero, there is no reason to open up a savings account or a CD, which are traditional measures taken by the middle class. Instead, under low interest rates people have a tendency to invest their money, which the middle class in particular is significantly less knowledgeable at. There was a time in America, more than twenty years ago, when savers were rewarded with high interest rates and thus their money was working for them-this has not been the case certainly for all of this millenium.
Low interest rates, not only contributed to the housing bubble which has been a disaster for the middle class, but it has also punished those who are traditionally savers in our economy. Turning middle class people into investors has not only prevented them from saving and growing their incomes through passive means, it has also led to massive wealth transferring from the middle class into the hands of the most skilled investors. Low interest rates are a clear indicator that the time for a solid financial education has never been more of a necessity for the middle class, before the entire middle class is wiped out by god forbid a Bernie Sanders presidency.
Not only can’t the middle class save because of low interest rates, they’ve been forced into becoming under-skilled investors in order to have some kind of a retirement, plus inflation as well as increased taxes. When Bernie Sanders talks about the middle class he very conveniently leaves out the role of artificially low interest rates and what is actually holding back the middle class. Socialism is absolutely not this mystical boon to the middle class that Bernie makes it sound like, because clearly they are the ones who have to pay for that too.
The United States is not the only country where its’ Central bank has schemed so much and come up with such awful solutions for low interest rates, that in the third and final segment we will discuss how the Bank of Japan (their central bank) and the European Central Bank are now using NEGATIVE interest rates. Yes, you read that correctly. Savers in certain countries are now being penalized for not spending everything they have.
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