Little Known Ways the Federal Reserve Punishes American Savers and Supports Conspicuous Consumption.

The Federal Reserve is one of the most mysterious organizations in the world.  What they don’t hold back on however is their intentions for the American saver.  They are one of the biggest key players in the financial bailouts yet very little is ever discussed about this organization on national or even cable television.  The actions taken by the Fed during the grand financial bailout are subtly punishing American savers.  Policy will dictate market action.  The Fed is trying to corner American savers so they are left with two options, both risky and problematic in the long-term.  The American middle class is slowly sliding into oblivion thanks to the Federal Reserve and their favorable banking bailouts.  Our economy is largely driven by massive consumption.  Saving money especially in more traditional savings accounts is good for you, but not necessarily the economy.  This is the paradox of thrift and the Federal Reserve is determined to punish savers and pave the road to conspicuous and financially dangerous consumption.  The Fed agenda is clear and this is what American savers can expect for years to come.


Contrary to what is being poured out over the airwaves the Federal Reserve wants you to spend every single penny you have.  The Fed has grown its balance sheet by a factor of three since late 2008 thanks to major financial bailouts:

federal reserve balance sheet 2012

If the crisis is now over, why is the Fed balance sheet still near peak levels?  That is because the Fed is still holding onto trillions of dollars of toxic loans likely backed by residential and commercial real estate.  We say likely since we do not have a full accurate view of what is on their books.  So why does this mean the Fed wants you to spend every green dollar in your wallet?  First, since we now live in a debt based money system, access to debt has become a new form of pseudo-wealth.  As the Fed takes on more debt it slowly debases the value of the currency thus making your dollars worth less and less as each day goes by.  Don’t believe this?  Just look at the US dollar chart for the last few decades:


The dollar has lost over 50 percent of its purchasing power since the 1980s thanks to actions taken by the Fed.  You might say, well I’ll simply put my money away in a savings account to avoid the evils that come from inflation.  That is unlikely to help as well:

savings rate

The typical savings account in the US is paying slightly above zero percent and is basically a brick and mortar mattress. By simply keeping your money in a savings account you are losing value as the dollar debases and inflation rears its ugly head.  This is not accidental but a purposeful strategy set up by the Fed.  They want you to spend or stuff your money into the extremely volatile stock market.  Good luck competing with connected banks with purchased politicians or battling it out with high frequency trading boxes.

Even going back to the 1980s we see that savings accounts paid a much higher rate (of course anything is higher than zero percent):
savings rate on passbook savings 5 percent 1980s

The problem also is that most Americans are now poorer than they were a few decades ago.  The average per capita income is $25,000 and the overall net worth picture has gotten particularly bad for younger Americans:


Both younger and older Americans are poorer than they were in 1984 when excluding home equity.  If we add home equity, the figures improve only a bit for those 65 and older.  These actions create a form of shadow inflation through higher grocery prices, a more expensive college system, higher medical costs, and stagnant wages.  At the same time banks are still charging high rates on credit card debt while borrowing from the Fed at levels that are practically free:

credit card rate report

Given the massive risk in the market the overall baseline interest rate should be much higher.  Yet the Fed by conducting these actions favors the following:

Fed Favors:                         Financial market speculation, spending, going into debt (at artificially low rates)

Fed discourages:              Savings (via low rates), being prudent when it comes to spending (go shopping)

So if you are wondering why it is so much harder for you to save just understand that our central bank is favoring policies that discourage savings.  This is a debt addicted system and households are deleveraging not because they want to but because they have maxed out on what they can purchase.  One thing the Fed cannot change is overall wages for the typical worker but they seem satisfied spiking wages for those in the financial sector that have access to the largest digital money machine known to humankind.  The rest of the American public?  Enjoy those 0 percent savings rates because they are likely to stay.

RSSIf you enjoyed this post click here to subscribe to a complete feed and stay up to date with today’s challenging market!



TAGS: , , , , , , , ,


Subscribe Form

Subscribe to Blog

My Budget 360

Enter your email address to receive updates from My Budget 360:

100% Private & Spam Free.


Subscribe in a reader


Popular – All Time

  • 1. How much does the Average American Make? Breaking Down the U.S. Household Income Numbers.
  • 2. Top 1 Percent Control 42 Percent of Financial Wealth in the U.S. – How Average Americans are Lured into Debt Servitude by Promises of Mega Wealth.
  • 3. Is college worth the money and debt? The cost of college has increased by 11x since 1980 while inflation overall has increased by 3x. Diluting education with for-profits. and saddling millions with debt.
  • 4. The Perfect $46,000 Budget: Learning to Live in California for Under $50,000.
  • 5. Family Budget: How to go Broke on $100,000 a year. Why the Middle Class has a hard time Living in Expensive Urban Areas.
  • 6. Lining up at Midnight at Wal-Mart to buy Food is part of the new Recovery. Banks offering Mattress Interest Rates. The Invisible Recovery Outside of Wall Street.
  • 7. You Cannot Afford a $350,000 Home with a $75,000 Household Income!
  • 8. Crisis of generations – younger Americans moving back home in large numbers. Student loan default rates surging largely due to for-profit college expansion.
  • 9. The next massive debt bubble to crush the economy – 10 charts examining the upcoming implosion of the student loan market. $1 trillion in student loans and defaults sharply increasing.
  • 10. Welcome to the new model of retirement. No retirement. In 1983 over 60 percent of American workers had some kind of defined-benefit plan. Today less than 20 percent have access to a plan and the majority of retired Americans largely rely on Social Security as their de facto retirement plan.
  • Categories