Bernanke and the Fed Repeal Einstein; Near-zero interest rates, which are expected to last through mid-2015, make a mockery of thrift.
Albert Einstein reportedly called compound interest "the most powerful force in the universe." He didn't live long enough to experience Ben Bernanke.</br></br>Last week the Federal Reserve chairman told the world that U.S. savers should expect the new normal of near-zero interest rates to last through mid-2015. So compound interest is a concept with which today's early to mid 20-somethings will remain essentially unfamiliar.</br></br>For those of us who are slightly older, it seems as if Mr. Bernanke is on a mission to convince us that everything our grandparents told us about household economics was wrong.</br></br>My grandmother and grandfather were children of the Depression who built a successful dry-cleaning business with inspiration from--no kidding--a Wall Street Journal article. Then they built an insurance brokerage, and after much saving and hard work retired as the proverbial millionaires next door. They spent money on a house and a boat. But clothes always came from the secondhand shop, and Grandma remained an avid coupon clipper until she and Papa went into an assisted-living facility a few years back.</br></br>On family vacations to see them in the Seattle area, I always heard the lecture about the importance of saving, or "making your money work for you." Once on a coupon shopping run, someone asked Grandma why she didn't buy in bulk. My father answered for her: "You wouldn't want your money all tied up in toilet paper."