Rock-bottom interest rates have pumped up stock prices, knocked down mortgage rates and supported the creation of countless unicorns in Silicon Valley. Savers, on the other hand, have been crushed by near-zero rates.
Some of those savers penalized by the Federal Reserve’s easy money policies have made their displeasure known directly to the central bank’s leaders.
Janet Yellen said Thursday that when she ran the Fed “a lot of people” correctly guessed her email address – it wasn’t very challenging to do that since it was Janet.Yellen@FRB.gov – and fired off angry messages about how the central bank was making life miserable for them.
“Some of the most disturbing notes came from people who said, ‘I worked, I played by the rules and I saved for my retirement and I have money in my bank. Do you know I’m getting absolutely nothing?’” Yellen said at the World Business Forum in New York.
The Fed dropped rates to near-zero in late 2008 as part of a massive response aimed at quelling the panic gripping the American economy and financial markets.
“It was up to us to make this the Great Recession, rather than the Great Depression,” said Yellen, who led the San Francisco Fed during the 2008 crisis.
Yet the past 11 years of extremely low interest rates has unintentionally punished savers. Money in the bank earns very little interest. Adjusted for inflation, that money often loses value.
“If you’re a saver and you’re hoping to save for retirement, this is a really miserable environment,” said Yellen, who presided over five interest rate hikes during her four-year tenure as Fed chief that ended in February 2018.
’Not a happy calculation’ for savers
The former Fed chief explained that bottom-scraping rates mean that people seeking to retire need to accumulate substantial amounts of we