A lifelong Democrat, I now find myself taking issue with the Obama administration in general and Federal Reserve Chairman Ben Bernanke in particular as it pertains to current Fed policy. What seemed to have been a good idea at the onset, to keep interest rates low to stimulate the economy, has been counterproductive and harmful to many of us who need help the most, the retired, the elderly and the poor. The funds this group depends on come mostly from savings. This was the way many of us were directed over time by the prevailing wisdom on how to prepare for the future. The future is here but any growth we anticipated in our savings has all but disappeared.
On the other hand, the banks, major corporation, investment firms to mention a few have benefited greatly from the low interest rates. The cost of capital has never been so cheap and these firms have been quick to gather it up. The idea was to use this cheap capital and reinvest in the economy and get people back to work. But to a great extent that did not happen. These big borrowers are now sitting on large amounts of cash, not investing and certainly not rehiring to pre-downturn levels. Our growth is under 2 percent a year, hardly robust enough to regain our footing.
It is my belief that if the Fed rates were raised, the gains made by those who depend on savings and other rate-sensitive investments would be spent on the economy and add a needed boost, which corporate American seems unwilling or unable to provide.
Robert M. McDonough, Columbia