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Financial repression is crushing retirees

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There is no doubt that inflation is coursing its way through the economy. Yet the amount of interest you can earn on things like CDs and money market funds is curiously going nowhere.  That’s called financial repression, and it’s making it hard to retire.

The interesting thing about financial repression is it’s being engineered by the Federal Reserve. The Fed is consciously driving up inflation and keeping interest rates low. That means the price of everything you need goes up but the interest you can earn to pay for those things doesn’t.

In prior economic cycles, we didn’t have financial repression. For instance, in the 1970s, when inflation was 10%, CDs paid about 10%. Thus, investors could at least stay even. But today, it’s an entirely different story. The financial repression scenario started after the 2008 financial crisis. Today the gap is the widest ever, with inflation running 5% and short-term interest rates running

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Linda Barbara

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