Senior Savings Famine

Sun streaking cold
An old man wandering lonely
Taking time
The only way he knows
--Jethro Tull

Charles Schwab estimates that people aged 65+ lost more than $2000/yr on average due to the Fed's financial repression programs. Because seniors tend to spend about $2 for every $1 of interest income, Schwab estimates that financial repression has cost the economy upwards of three quarters of a trillion dollars in lost spending by seniors over the past six years.

Moreover, many seniors have also taken on more risk in search of yield bearing instruments. Instead of CDs with puny yields, for example, many seniors have substituted dividend-paying stocks and high yield (read: junk) bond funds.

Seniors and other savers have been experiencing a famine that Charles Schwab suggests is coming to an end with the recent closing of the Fed's QE3 project. Not so fast, Chuck. Central banks around the world, recently those of Japan and China, appear to revving up their interest rate suppression machines.

And just because the Fed is no longer buying bonds in large size does not mean that it intends to raise short rates (which have large influence on yields linked to savings vehicles) any time soon. Or that the Fed wouldn't re-engage their QE habit at the drop of a stock price, er, hat.

Seniors and others hungry for yield are likely to continue down the path toward starvation.