More on low interest rates
Todd's Tax Service LLC
At 2% interest , it takes 36 years to double your money! (Rule of 72)
Copyright © Todd's Tax Service LLC. All rights reserved.
Low interest rates have a profound impact on borrowers (primarily mortgage rates) and savers alike. But low rates also impact the average American in other ways as well. Pension Funds, for example, have been forced to move money into riskier assets due to the very low rates on their former staple, U.S. Government Bonds. This situation with the pension funds is and will continue to impact anyone drawing a pension. Cost of living increases are going to be flat and some funds are having financial problems in part due to the low rates. And with the huge federal debt, Uncle Sam has a vested interest in keeping rates low, forcing down the cost of borrowing and keeping deficits lower than they would otherwise be.
One of the unintended consequences of this financial engineering has been an unexpected aversion to risk on the part of American business and some investors. Instead of spurring borrowing and investment, this strange environment has put the brakes on and caused a slower growth rate in the economy. (This was exactly the opposite of what the Federal Reserve intended when it moved rates to zero).
Most of this is beyond the control of the average individual. Individuals need to get their house in order if they want to maintain their standard of living and thrive in this unprecedented environment.