Fed Takes a Shellacking

The business press has been reporting about the "shellacking".   No, not that one, this one is being administered to the US Federal Reserve bank by foreign governments.  So I guess the Fed Reserve must be doing something wrong, right?  Wrong.

The Fed Reserve is finally standing up for the American economy against currency manipulation (by the Chinese) and lack of demand spurring policies (Germany) that have sealed the fate of the American economy.

Here's what British Economist Roger Boutles recently said:

" The fundamental fact we have to bear in mind all the time is that America has been supporting world demand, and most of the countries in Asia have been doing the opposite. And that as far as I'm concerned means that the Americans are the good guys and the Chinese and the other Asians are the bad guys. In simple terms, they've been living off the fruits of demand created in America and the Anglo-Saxon world and it can't go on. Germany should be in the dock as well."

Mr. Boutles continues:

"The fact that German demand is as weak as it is, is Germany's fault. Who else's fault is it? The British fault? The American fault? How can we control German domestic demand? The fact of the matter is, this is a country - and China's another one - which adopt mercantilist principles; that's to say, they think it's perfectly okay to get richer at the expense of other countries. Well of course, for the world as a whole, that can't work and we are coming to pay back time."

Your savings didn't do so well this past decade.

In the 10-year time frame ending Sept 30, 2009, this chart shows how the U.S. stock indices (and your money in them) performed - not a pretty picture.  Your "certified" financial planner has probably told you that over a decade stocks increase 12% on average.  Now you know what kind of advise you have been getting.

By keeping the interest rate low, the Federal Reserve has created all sorts of problems for the U.S. economy.  Not the least of which is depriving hard working, hard saving American families of a safe investment vehicle, such as FDIC insured bank accounts, in which they could deposit their money and earn a decent interest in return.

Without real interest-bearing accounts, Americans deposited their savings and retirements in the U.S. stock market and have lost an entire decade. 

So a penny saved is a penny earned but not much more.  For many Americans this means that retirement is much further off then they thought.