In my last diary I made some obvious economic assumptions that clearly went right over the head of everyone that chose to comment and troll rate me on the diary. I was an early critic of the John Edwards so I am used to getting troll ratings in the name of public service.
As a continuing public service to the readers of this site I shall present a very elementary lesson on how our government screws over savers and the obvious ramifications that follow.
FDIC insured accounts are the only absolutely safe way for Americans to save US dollars. This is safer than putting US dollars under your mattress and buying a big gun. After all people that own guns are likely to get their fool heads blown off.
The dollars may be completely safe in the savings account but it is the value of the dollars that are at risk. Our government has a policy of continually weakening the value of the dollar in order to promote growth, full employment and prosperity. Also Uncle Sam wants to screw the Chinese out of their large USA dollar holdings.
Your FDIC insured savings account pays interest. So if your dollars lose a little bit of value to inflation, you get interest and it is also compounding interest so your savings holds its value.
But what if the rate of inflation is greater than the interest recieved on a savings account? In this case the USA dollars one holds in an FDIC insured savings account will lose value.
From my last diary it seems that Dailykos readers have no concept of savings, but savings must be a very important if not the most important part of any government plan for the economy. Without savings how are people to procure food and shelter if they suddenly have no income? If the government makes it impossible for people to save what happens to people that lose their job?
And what about people that are not so keen about their job? Some people and probably a whole bunch of people are not too happy about their job. Perhaps they do not like their pay or they don't like the boss or maybe the job is hard on the body or numbing on the mind. If these people have nothing saved, it is that much harder for them to tell their employers to shove it; without savings they are that much more chained to their job.
What is even the point of working at all if there is no savings? Are we just supposed to live from paycheck to paycheck with nothing ever saved? Or better yet are we supposed to borrow as much as we can and live up to our eyeballs in debt?
It is as certain as night follows day that if interest rates on FDIC insured savings accounts are lower than the rate of inflation, savings will be discouraged. People that wish to maintain the value of their savings are forced to "invest" the money. This usually means paying way too much for a house or investing in Wall Street where the investment banks and all the rest of the corporate thieves will just steal your money.
Further very low interest rates on FDIC insured accounts are a strong added incentive to borrow or leverage "investments." People are desperate for yield to maintain the value of their savings so it becomes much easier to borrow. If money cannot be saved, then clearly it is best to spend it and better yet borrow as much as one can and spend that also.
We saw the consequences of all this cheap money first with the stock market bubble and later the housing bubble. Instead of encouraging its people to save money our government is forcing its people to borrow, invest and leverage themselves to maintain the value of their savings. Asset prices become overpriced because this government policy of cheap money puts a strong leveraged bid on all assets.
As the market rises those that take great risks with great amounts of leverage(other people's money) can make huge profits, and then when the bubble pops the most heavily leveraged investors lose the most. In almost all cases the average Joe just gets screwed.
Perhaps most importantly if the government discourages savings, government obviously is encouraging consumption. Except for perhaps rats and cockroaches human overconsumption is a disaster for the creatures of Mother Earth.
Now to clear up some prevalent Dailykos ignorance that appeared all over the comments of my last diary, the government controls the interest that the public receives on their FDIC insured savings accounts. Further the government controls the general rate of inflation although government cannot control the level of inflation nearly as firmly as the government can control interest rates on FDIC insured savings accounts. THere is a time lag between government action on inflation and the effect of that action on prices. I shall not go into the mechanics here as this diary is already too long and more than likely quickly destined for the netherworld, but if anyone wants to show their ignorance they can dispute this point in the comments.
The issue as to whether our government should be encouraging its people to save is fundumental. It is obvious corporate America does not want its people to save as then people would buy less of their products, and it would not allow the corporate elites and their band of merrymen to steal American's money when they are forced to invest in the stock market.