With rates at rock-bottom levels, you frequently hear about how savers are getting screwed, and typically the blame is heaped on The Fed for keeping interest rates so low.
But while the Fed may control short-term rates, the Fed’s actions don’t really tell the whole picture.
As David Goldman points out, low rates are a function of — what else — supply and demand.
So on the one hand, you have savings surging…
While total fixed-income issuance growth (which includes Treasuries, as well as any kind of private debt) is rapidly decelerating:
So naturally, you have tons of dollars chasing savings vehicles that aren’t keeping up.
Thus, if you want to blame someone for screwing savers, don’t blame Bernanke, blame the tightwads in DC who aren’t going deep enough into debt.
And when the new age of austerity kicks in, watch for savers to get screwed even more.