A consumer complaint is ricocheting around the world: low interest rates are eating away at savings.
Bill Taren, a retiree near Orlando, Fla., discovered in August that his
credit union would pay only 0.4 percent annual interest on his saving
account, even though inflation averaged 2.8 percent over the last year.
So he and his wife decided to just stuff their money in the mattress, he
says, because at least there “we can see the cash when we want.”
Jeanne and André Bussière, in Annecy, France, have a stable pension and a
bank account that pays 2 percent interest — “almost nothing,” they say —
even though the consumer price index rose an average of 2.5 percent over the last year.
Jiang Rong, an information technology professional in Xiamen, China,
decided to dive back into the speculative real estate market rather than
watch his savings wither at the bank. In China, too, the cost of living
is outrunning savings, as local restaurants nearly double their prices.
The fact that interest yields are so low in so many parts of the world
is no coincidence. Rates are determined not only by markets, but also by
government policy. And right now many governments say they have good
reason to keep their own borrowing costs as low as they possibly can.
Just last week, the government’s report on job growth in the United
States showed continued weakness, and an international forecasting group
warned that the European economic powerhouse, Germany, will fall into
recession later this year.
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