Echoing Matt Yglesias, I too read the transcript of St. Louis Fed chairman Bullard’s speech on housing and monetary policy.

Bullard, per the St. Louis Fed:

Bullard noted that labor market policies (e.g., unemployment insurance, worker retraining) have direct effects on the unemployed.  In contrast, he said, “monetary policy is a blunt instrument which affects the decision-making of everyone in the economy.”  In particular, low interest rates hurt savers, he stated.  “It may be better to focus on labor market policies to address unemployment instead of monetary policy.”

For the past five years I spent as a front line financial representative I can assure you that the aging population of this nation see falling interest rates on their savings, and thus affecting their dividends in the worst possible light. For example, I tried explaining to an elderly person why it was important on a macro level at least for the government to keep rates low, at least in theory. This customer harked me back to the ‘good ol’ days’ of the 1980’s, when Savings and Loan Associations were crashing, and interest rates were as high as a mushroom cloud.

I think it is a fundamental problem with the mass of the electorate, or at least the mainline of investors from the electorate, that they are willfully ignorant of the changes in economic and monetary policy that has evolved since the 1980s. And when I tried in vain to explain this, the answer I got more often than not was that I was ‘too young to understand’.

Savings are low because there is an obvious deficit in consumer investment in both the market and real estate, respectively. The answer to sustained economic stagnation is not to put all your money into a MMA and hope to wait the crisis out (at least for longer that a year). It is to be involved in the process and realizing that the returns on your investment in safe depository accounts will likely yield less than other investments (like your home improvements which cause a production trend).


In summary, all those people wishing that they could watch their modest fortune roll over and over to make more money are deluded at this juncture. Without a great deal of market effort, the return on any investment will likely just eek more and more towards zero.