Treece Blog: Selling out seniorsWritten by Dock David Treece | | firstname.lastname@example.org
During the tough economic times of the past six years, steps have been taken to stabilize the US financial system. Some may disagree with what, but virtually no one denies that something had to be done. During that time the Federal Reserve, in soon-to-be-former-Chairman Ben Bernanke’s words, “provided liquidity to the financial system.” By “the system,” Bernanke is referring to banks – big banks.
The Fed’s preferred method for “providing liquidity” over the past several years has been a combination of several steps. First, interest rates were pushed down to artificially low levels – and kept there. Second, the Fed provided liquidity through asset guarantee programs. Most recently, several rounds of quantitative easing provided more direct injections of “liquidity” to our nation’s financial system. (Note: The substitution of “financial system” for “economy” is intentional, as liquidity was provided to one but most certainly not the other.)
These steps, as many readers will note, have been discussed in this space numerous times. However, at the risk of sounding repetitive, let us summarize previous articles by saying that none of these steps was taken to benefit the American public; nor were they taken to benefit America as a nation. They were taken to help big banks.
In fact, this process has actually done a great deal to hurt Americans – most especially seniors. Most retired Americans provide for themselves through fixed income solutions; be they CDs, bonds, pensions, old 401ks, annuities, or any one of a number of various products. The majority of these structured products are tied to interest rates and consumer prices. When interest rates are higher, investors holding bonds are paid more on their investment – in other words, their incomes are higher. Most structured fixed income products behave according to this general principle.
This all means that, as a direct result of the Federal Reserve’s low-interest-rate policies, American seniors have suffered from a significant lack of income over recent years. For many who encountered losses, first in the tech bubble of 2000, then the more recently calamity of 2008, this income shortage has translated into a lifestyle change – and not for the better.
Mind you, this sacrifice by our nation’s seniors might have been avoided; or it might at least have been justifiable – if any of the problems which solved it had actually been resolved. Unfortunately, that’s not what happened. The policies listed above (and others which have surely been overlooked) were supposedly instituted to resolve the problems on big bank balance sheets.
Instead, the Fed didn’t fix the problem – they just made it bigger; they magnified it. In many regards, the American financial system today is more dangerous than it was in 2008. In 2008 we learned the system (as it was then) was too big to fail; now it’s almost too big too hiccup.
And what insight is to be gleaned from these unfortunate developments? Our best hope – what seems to be highest and best use (although still sad) use for all the suffering which has been endured – is that people finally learn that their votes matter. Whether on a local, regional, or national ballot, votes have consequences which go far beyond the immediate, foreseeable future.
In many ways, seniors today are facing problems (and will likely continue to face problems) due in part to votes cast decades ago. Just as Jimmy Carter’s policies led to runaway inflation and the unnecessary explosion of asset prices, George W. Bush’s foreign conquest spurred federal spending which grew the national debt and involvement in unstable regions.
Many of these policies have been continued by President Obama, but combined with a new progressive social agenda at a time when our country can least afford it.
Our country – and our seniors – will get through these problems. This is not the end of America, or of our economy. Nor is it the last of our debacles. All we can hope is to learn from our mistakes going forward, so that, perhaps instead of repeating those mistakes, we can move on to make new ones.
Dock David Treece is a partner with Treece Investment Advisory Corp (www.TreeceInvestments.com) and is licensed with FINRA through Treece Financial Services Corp. He provides expert content to numerous media outlets. The above information is the express opinion of Dock David Treece and should not be construed as investment advice or used without outside verification.