(4-29-16) Back in the olden days, retirees who were part of the Great Unwashed could always invest in what they typically invested in -- shorter-term bank Certificates of Deposit (CD’s) and Treasury bills.
According to Simon Black of “Sovereign Man” – “Today, the latest government report shows the US inflation rate at 0.9%; yet that same 1-year US government bond yields just 0.53%. In other words, today you lose more money to inflation than you earn in interest.”
Now the yields are a net negative relative to inflation and that’s due to the actions of the central banks.
People who talk about this blame the central banks, but they fail to mention that what the central banks have done was necessary to generate as much economic output (Gross Domestic Product or GDP) as possible.
The reality is that central banks are doing their jobs – to reduce the cost of money in order to reduce the cost of economic product. The mandate of the central banks is very simple – to control the cost of money and to maintain liquidity.