As you may know, I’m a big fan of inflation. I think inflation is the best way to pay off our national debt (makes it a smaller percentage of the GDP) and the only people who really hate inflation are the people who lend you money. They get paid back in dollars that are worth less (worthless?) than the dollars they lend you.
That’s why the Federal Reserve, a bunch of Bankers, spend day and night combating inflation. They’re not doing it for you – you borrow money! They are doing it to make sure that your mortgage stays at 30% of your income. If you keep getting raises due to inflation that mortgage (and you should always have a fixed, of course) might go down to 10% of your income over time leaving you with extra money.
Too much inflation leads to high interest rates which causes consumers not only to borrow less (gasp!) but to save more. I remember a time when you got a CD that paid 12% AND a toaster for putting money in the bank! Now you get 3% and a $1.25 fee for reviewing your statement – and they wonder why Americans save less!
You often hear that we are not a nation of savers but Americans have deposited $1.5T since 2002, bringing our people’s total savings to just under $4 Trillion, about as much as the rest of the planet combined! While it may be a small part of our total income, it’s quite a large total income to begin with!?
The joke is that we are being paid less money for our savings than at any time since 1960 so again I will point out that you are being fed a line of crap by bankers! They are holding $4T of your money and paying you 3% interest yet if you want to buy a home you must pay 7% (plus fees!).
This is what is holding rates down, the massive availability of cheap cash right here in our own country yet you will never hear it from our government (other than Ben hinting at “Global liquidity“) because they work for the guys that borrow your money and lend it back to you.
Their mandate is to keep inflation down at all costs: At the cost of your wages, at the cost of your home’s value, at the cost…