Ralph Nader, the self proclaimed protector of the consumer, now wants to save savers. He accosted Janet Yellen, Federal Reserve Chairman, for the zero-percent interest rate monetary policy in The Huffington Post. In his An Open Letter To Chairwoman Yellen From the Savers of America, Nader also told Yellen to she “should sit down with your Nobel Prize winning husband, economist George Akerlof, who is known to be consumer-sensitive.”
Yellen didn’t get to where she is now by being a shrinking violet. While she normally let’s idiots yap away, Nader is just influential enough with the right types of people… and since he implied her inferiority to her husband in what seemed to be a veiled attempt at commenting on the general inferiority of women to men, she decided to use her market moving voice to rip Nader a new asshole. (My phrasing, of course.) In her November 23, 2015 response letter from her desk at the Federal Reserve, Yellen politely schooled Nader on basic macroeconomics. Things like how low interest rate has kept the economy from complete collapse, a result that would have wiped out savers. Or how low interest rate has provide price stability, which is necessary for planning an economy, including planning for employment. Or how high unemployment means people needing to dig into their savings to fund everyday costs, making any meaningful interest rate increase a very temporary relief since interest rates would have to increase to the level of spending in order just to keep people’s wealth flat. If one thinks about it, is a very high interest rate since the median savings of a household with an average age of 65 is about $171,000. If people live on $11,770 per year, the line of poverty, interest rates would have to be about 15% per year just to have savers stay even. This is the reason why lowering the interest rate for borrowers to finance new economic-business activity and earning our way out of an economic collapse is far better than charging borrowers a high rate of return for savers. And let’s remember, net-savers are wealthier than net-borrowers, generally.
Here’s a little advice from me to you, whoever is reading this: don’t mess with Yellen on intellectual grounds unless you know you are as smart as she is. And if you know you are as smart as she is, then you are not.
Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE.