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Letter to the editor: Government delays its financial reckoning

Thursday, April 4, 2013 - 12:01 am

A massive transfer of wealth has been occurring on an accelerated rate with the cooperation of the Federal Reserve and the federal government. Persons who have lived within their means and have been successful have seen their cash savings and CDs earning a progressively lower rate of return. Interest rates on cash assets have dropped to nearly zero as the Fed provides money to banks at nearly no cost and artificially keeps interest rates low by printing money in order to allow the federal government to borrow and spend out of control.

Everyone will eventually have to pay for this government debt, but short term it is the savers (many of whom are retirees) who are paying the bill through lost earning power of their cash assets. Look at the interest rates offered by financial institutions on savings accounts or CDs. In most cases it is less than 0.1 percent. That means if you have $100,000 in cash assets, you will earn $100 dollars on it in a year. After taxes (yes, you must pay income tax on the $100), you cannot buy a tank of gas on the one-year return on $100,000 investment.

For most retirees their income is a combination of Social Security, pensions and investment income. In a strong economy the investment income can be the largest portion of total income. That portion is nearing zero now with the government’s monetary policies and the weak economy. What chance does the economy have to improve when the investors cannot get a reasonable rate of return on their investment? Who profits from a monetary policy like this?

A government that ignores or does not even submit a budget and then spends out of control delays its financial reckoning. Individuals who mirror the government in their personal finances have lower interest rates on their debt. The millions of “takers” from local, state and federal government encourage the continuation of this kind of financial policy to get their “freebies.” Taking care of those in real need is quite different from the unsustainable gravy train that has been institutionalized with this policy. This cannot continue. The tank will run dry. Economic facts do mean something. The more wealth government consumes, the less economic growth will occur. Society must lovingly care for its weakest and less fortunate, but that portion of society should never be remotely near a majority.

Charles McGregor

Coldwater, Mich.