A Tough Time for Savers

It’s easy to understand why savers feel like collateral damage in the Fed’s fight against recession, but too much sympathy for their plight is dangerous. Sumner points out that, in the past century, there have been only five occasions when a central bank tried to end a zero-bound-interest-rate policy. On four of those occasions, the central bank acted too soon, the economy slipped back into recession, and rates had to be cut all over again. “Raise rates now,” Sumner says, “and you can quickly turn what looks like a recovery into a double-dip recession.”

Savers have gotten the short end of the stick due to the Federal Reserve keeping interest rates low (just check out those interest rates on our “high-yield” savings accounts), but as James Surowiecki argues in his New Yorker column, there are still a lot of people out there who aren’t able to save anything in the first place and in the grand scheme of things, the Fed’s strategies have been keeping the economy from dipping back into a recession — and a double-dip recession would be terrible for everyone.

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