Yield-Starved and Losing Patience

It seemed obvious several years ago that retirees would shoulder much of the burden of the financial crisis and its residual effects.

While events have generally played-out in line with this projection, the backlash from seniors has been surprisingly subdued.  The lack of pitchforks seems odd given the fact that the number of retirement age voters is increasing by 10,000 each day in the United States.

That said, the capital versus retirees story has been trending-up lately. This may have something to do with the election year.  It could also could be the result of millions of savers around the world starting to realize the implications of negative real interest rates as far as the eye can see.

Another aspect of this story that is starting to surface is that the taxpayer resources used to shore-up the banking system are not necessarily working there way--at least in a broad manner--back into the system.  

Gretchen Morgenson of the New York Times wrote about this recently in a piece titled “0.2% Interest?  You Bet We’ll Complain.”  As Morgenson illustrates, not only have savers suffered from ultra low yields, but the alleged benefits of a healthier banking system have not been widely distributed to those who put-up the funds to return the system to health in the first place.

Pimco’s Bill Gross frequently addresses the capital versus savers (and capital versus labor) issue in his monthly letters to investors.

In a letter titled “Skunked” from April 2011, Gross comments on the “less observable, yet historically verifiable” policies that can be used to pick the pockets of savers:

  • Inflation
  • Currency devaluation
  • “stealthily via policy rates and Treasury yields far below historical levels -- paying savers less on their money and hoping they won’t complain.”

The November elections should provide a good indication of whether Boomer patience is starting to wear thin.