Audit the Fed is a cry often heard by its critics, who are intent on uncovering the cozy relationship between the central bank and Wall Street. But if you needed the damage done by the Federal Reserve on everyday savers quantified, look no further than a study by NerdWallet.
The personal-finance Web site used data from the Bureau of Economic Analysis to compare Americans post-tax disposable incomes and savings rates in 2006 versus those in 2016.
Its findings? The Feds zero-rate interest policy and quantitative-easing money-printing exercises have cost savers a whopping $7.7 billion over the past decade.
Years before normalization is felt: While Wall Street saw the S&P 500 stock index gain 60% thanks to this monetary heroin of cheap money, Joe and Jane Six-Pack have seen their savings accounts go nowhere, and the U.S. economy has managed to eke out only negligible growth in the 2% to 2.5% range.
Despite the fact that the Fed raised interest rates for the first time in almost a decade in December 2015, the trend is unlikely to change soon, CNBC predicted. Even if the Fed gets back on the path to normalization, it probably will be years before savers see significant rewards.
This lack of rewards has driven many savers into markets they dont quite understand, like stocks, in a desperate search for yield. Alternatively, all too often these savers on fixed incomes, many of whom are senior citizens, have slogged on earning next to nothing from bank accounts and money-market funds because they are paralyzed by the thought of gambling and losing on stocks in their twilight years.
Its a reality that people who have fixed incomes do rely on savings accounts. Thats something we would recommend against, said NerdWallets Devan Goldstein. Somewhere in the toolkit between savings accounts and an index fund is a low-risk but slightly higher return vehicle.
Gold delivered in past decade: And there is another alternative. Other options to consider are alternatives such as real estate or precious metals, Goldstein noted, according to a CBS News report on NerdWallets findings.
The tide is once again turning toward precious metals, even more decisively now that negative interest rates are rapidly replacing zero interest rates in Japan and Europe.
And look at where these savers might be had they allocated some of their capital into gold. On Jan. 1, 2006, the price of gold was about $514 an ounce. Ten years later, on Jan. 4, 2016, the price was at $1,077. Thats a gain of 109.53%! With the price now at roughly $1,229, gold has returned 139.11%
And certain types of rare, numismatic gold, silver, and copper coins have seen even higher gains.
With the Feds low-rate policies clearly stiffing savers for a decade now, savers would be insane to keep banking on simple deposit and money-market accounts. The definition of insanity is doing the same thing over and over while expecting a different result. The alternative to the Feds inflationary thievery is clear: gold and silver bullion plus rare coins.