This morning’s (i.e., Monday, 8/5/13, page A2) Wall Street Journal features an article
by Tom Orlik, “Murky Data Complicate China’s Policy Choices” that addresses the
possible undercounting of Chinese consumption in calculating that nation’s GDP .
While Mr. Orlik’s main argument was, as usual, insightful
bordering on intriguing, yours truly was especially struck by an observation
made late in the article, to wit…
“Critics say low
interest rates have crimped income for households by reducing returns on
savings, denting consumption growth. The
International Monetary Fund estimates that low interest rates transfer about 4%
of GDP a year out of the pockets of household
savers and into the coffers of state-owned firms that borrow at preferential
rates.”
I have been arguing for years that what I call “Ben
Bernanke’s War on the Elderly,” or the continuing low interest rate policy that
is by no means uniquely American, is in effect a huge tax on those with the
prudence to save imposed in order to reward those who spend. But never have I seen it put so succinctly,
outside my blogs, as Mr. Orlik puts it in this morning’s WSJ article. Unfortunately,
Mr. Orlik is writing about China ,
so the comparison to the United States
might escape some readers. Further, the
comparison is not as perfect as one would want; for example, in this country,
the low interest rates transfer money out of the pockets of savers to the
government and other prodigious spenders rather than to state owned
enterprises, as in China .
Still, the point is the same; low interest rates are having
an insidious effect on our economy. The
immediate effects are to deter consumption and to make the lives of those who
depend on their savings more difficult.
The effects will only intensify over the years as savers are pillaged in
order to reward spenders with the predictable effect on our already miniscule
savings rate. One hopes that more
people would make this point about the United
States .
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