Low interest rates may be nice for people with home mortgages or car loans, but they suck for retirees and pension funds. The peerless
David Cay Johnstone explains:
The crisis next time: collapsing investment incomes for older Americans as artificially reduced interest rates force them to use up their savings and drive more pension plans into failure.
Eviscerating the interest income of savers is the undeniable result of a long-running Federal Reserve policy to reduce interest rates, especially since December 2008. The Fed reiterated on Aug. 1 that it plans to keep interest rates low through late 2014. It says this helps to promote stronger economic growth and bring down the jobless rate.
As in the mortgage crisis, you can see this disaster building by examining the official data.
At the broadest level, 53 percent of taxpayers earned interest in 2000. But by 2010 just 39 percent did, my analysis of Internal Revenue Service data shows, while high-interest debt has become ubiquitous.
Johnston predicts that American retirees who rely on interest income will run out of money before they run out of time. And things don't look too rosy for pension funds, either.
