Our Government Is Run By Uneducated Fools!!!

We have talked about this before, and it is called The Savings Paradox.  It was first proposed by Bernard Mandeville in his book, The Fable of the Bees, in 1714.  John Maynard Keynes expanded the explanation in the 1930's.  It is included in every macroeconomics text book I have ever encountered.

Basically, it says that when times are tough, the best policy for families and individuals is to save more of their income.  The paradox is that saving deprives the economy of income to drive it forward.  In short, what is good for individuals is bad for the country.  Simple enough, right?

Yet Bernanke has done three rounds of printing TRILLIONS of dollars (QE) to keep interest rates low so people will borrow (against their own best interests), and each time has been an utter failure.  Yet, he keeps trying, and trying, and trying.

Now one of this henchmen has decided to blame senior citizens, i.e., old people for screwing up their (the government fools) plans by following their, i.e., the old folks, own best interests!!

When you consider how much the fools in Washington get paid to be fools, it is almost enough to make you want to join the Tea Party (almost, but not quite enough).

Here is what this week's Business Week has to say about the topic.

      

Consumers

Aging Boomers Are Undermining the Fed

By Elizabeth Dexheimer and Jeff Kearns on November 15, 2012

John Rodwick scrimps and saves so he can spend on his seven grandchildren and cruise around the Rocky Mountains with his wife, Jean, in their motor home. “My wife and I love to travel, so that is our one big expense, but we are very, very conservative” otherwise, says the 72-year-old former business professor. The couple doesn’t go to hotels or restaurants: They cook and sleep in their 19-foot, blue-trimmed Roadtrek. With the value of their home dropping 30 percent in the past six years, the Rodwicks have become “very cost-conscious.”

Federal Reserve officials say they are concerned that retirees like the Rodwicks are making it harder for the central bank to create more jobs for those still working. Older people are more likely to avoid purchases of houses, cars, and other pricey items that the Fed is trying to encourage with record-low interest rates. Their growing numbers are making the Fed’s job even harder.

“Spending decisions of the older age cohorts are less likely to be easily stimulated by monetary policy,” said William Dudley, president of the Federal Reserve Bank of New York, in a speech on Oct. 15. Each day, some 10,000 of the 78 million American boomers, born between 1946 and 1964, turn 65. The share of the population that’s made it to that age will swell to 18 percent by 2030 from 13 percent last year, according to the Pew Research Center in Washington.

People usually save more as they near retirement, and they’re saving extra now that Americans’ wealth has been depleted by the financial crisis. From 2007 to 2010, median U.S. household net worth fell by 38.8 percent to $77,300, the lowest level since 1992, the Fed said in June. The savings rate has averaged 4.3 percent in the 39 months since the recession ended, compared with an average of 2.3 percent in the same period before the recession. Retirees and older workers also will likely cut spending as they anticipate tax hikes and cuts in Medicare and Social Security. Six out of every 10 baby boomers between the ages of 50 and 61 say they may have to defer retirement, according to the Pew survey. People in this age group were most likely to say their finances worsened since the start of the 2007-2009 recession.

Many retirees are staying in their homes, moving closer to their children, or getting smaller houses with less upkeep, instead of traveling or buying luxury items and second homes, says Britt Beemer, chairman of America’s Research Group, a consumer-behavior research company. “The practical has taken over the aspirational. If you’re not moving … to a brand new home when you retire, all those items you might have purchased are no longer on the shopping list.” Boomers are opting to spend more on education, mortgage debt, and their adult children and less on entertainment, dining, furniture, and clothes, according to a report from the National Center for Policy Analysis in Dallas.

Retirement incomes are being hit by the Fed policies meant to safeguard the recovery. Fed Chairman Ben Bernanke on Oct. 24 reaffirmed a plan to hold the main interest rate near zero at least through mid-2015. While this stimulates the economy, it also reduces interest income for savers. The interest rate on a five-year certificate of deposit fell below 1 percent for the first time on Sept. 20, according to rate tracker Bankrate (RATE).

Grisel Muina, 65, retired from her job as an insurance adjuster in Miami last year and is now seeking part-time work. She’s cut spending on food, cable, and home maintenance and may move into an apartment that she owns to let her daughter and grandchildren use her house. “I used to spend a lot of money, let me tell you,” Muina says. “Now I have to watch every penny. Once you’re used to a certain way of living, it’s hard to reduce.”

The bottom line: Retiring baby boomers who spend less on homes, cars, and other big-ticket items are blunting the Fed’s unprecedented easing measures.

Dexheimer is an intern for Bloomberg News in New York. Kearns is a reporter for Bloomberg News in 

 New York. 

So the net, net is that the fools in Washington want you to behave against your own (it doesn't just include seniors) best interests and spend money which you need to protect you against their stupidity!!

Is that a great government, or what???? 

P.S.  Because the Fed is holding interest rates close to zero, the savings of everybody, old or not, are not growing, and therefore, less valuable.  When does stupid stop???