Interest rates on CD's and any other investment vehicle like Treasury notes are the lowest they have been in years. No matter how much you have to invest and what time frame you want, it is hard to find anything that pays more than 1.5%. This has been the case for 2009 and now into 2010 with no signs that it will change anytime soon.
What I propose to you today is that these low rates are really just another distribution of wealth in America today. Who do low interest rates hurt? Do they hurt the poor? No. Do they hurt people who don't have a lot and are trying to get a loan? Certainly not, they help them.
Low interest rates hurt only one kind of person and that is someone who has worked hard and saved money all their life. Typically people with money tend to be older because they have had a lifetime to accumulate wealth. So, these low interest rates are hurting retirees, seniors, and the older folks who do have money the most. In fact, these people are being robbed of their income.
Take for example a person who has $500,000 saved and counts on the interest they earn from that money to live. At a rate of 5% which has been an attainable rate for many years prior to the last couple, the 5$00,000 would generate $25,000 in income. Now that is not a whole lot of money but that extra money can go a long way for someone who is retired.
Now in 2010 with the top rate being about $1.5% and often much lower, that $500,000 will only bring in $7,500. That's a 70% reduction of income just because of these low interest rates and suddenly that person is in trouble with a lack of funds. No matter how much money you have to invest in no risk cd's, your income has dropped 70% from where it just was several years ago.
Is it a coincidence that these low interest rates have really come about since the Obama administration has been in power? It is the Federal Researve and that determines interest rates with lots of input from who knows how many government beaurocrates and officials. The Democrats have forever been keen on income redistribution because it is they that pander to the "poor" and the downtrodden.
You hear about the redistribution of wealth all the time but you rarely ever hear it in conjunction with interest rates. These low rates are just another stealthy way that the goverment is trying to take money away from the "rich".