Inflation is Higher than Investment Interest Rates
For all of 2007, wholesale inflation rose 6.3%, and the consumer price index was up 4.1%. Most remarkably, the price of energy increased an average of 17.4%, and the price of food increased an average of 4.9% for all of 2007. These statistics are very shocking, especially since this unusually high inflation has no end in sight.
Consider this for a moment. If someone saved money a year ago, that money’s purchasing power is now less than what it was when it was saved. Even if that money was earning a high yield interest rate (such as a bond, checking account, certificate of deposit, or savings account) of about 6%, that money would purchase less now than a year ago. Even if an investment account earned 8% before taxes, the money in that account would have earned less after taxes than what inflation increased by.
Basically, investing money in a low risk account, such as an FDIC insured account, will only make the investment holder poorer when inflation is as high as it is. As a friend recently said, "saving money is no longer worth it". I feel obligated to say that on the other hand, everyone needs to save some money for emergencies.
Individuals who live on a fixed income, such as retirees, are becoming poorer each day even when they do not spend money. And it is much harder for young couples to save money for large purchases, such as a car or house. I’m surprised Americans aren’t revolting.
Since inflation is still very high and will continue being so in the near future, money saved now will be less valuable in the near future. Therefore, don’t settle for the status quo. Contact your representatives and demand this problem fixed immediately.
by Phil B.