Dr. Frankenstein, in Mary Shelley’s famous novel, sets out to do something that he thinks is good. He ends up creating a monster, not what he intended. In the wake of the pandemic, I understand why the FED lowered the interest rates to historic lows. But did the FED’s create a monster?
The extraordinarily low interest rates in place today are a boon when you’re buying a house, refinancing a mortgage, leasing a car or paying off student debt. If you qualify for a loan, low rates can help you spend less and get more.
But there is a dark side to falling interest rates. While they are helpful for qualified borrowers — and have contributed to tremendous returns for people who have held bonds for many years — they are terrible for savers.
Have We Created a Monster?
Live on less, dip deeply into savings or take on more risk in the stock market: Those are the nasty choices that many people will probably be facing. The dilemma is most pressing for those planning for retirement or already in it.