The Federal Reserve’s low-interest-rate environment is pushing
senior citizens into the stock market, according to Diana
Furchtgott-Roth, a senior fellow at the Manhattan Institute.
“The Federal Reserve … has said that it is going to keep interest
rates close to zero until the unemployment rate goes to 6.5 percent,
and at current rates of job growth, that will be some time in 2016,
or, if we’re lucky, 2015,” Furchtgott-Roth told Newsmax TV in an
exclusive interview.
She added that savers are not getting any return on their assets.
“Think about people on a fixed income, senior citizens, who are
relying on getting a historical rate of 5 percent from their savings
and IRAs,” she said. “They can’t do that anymore.”
These conditions are leading investors to stocks, with the Dow Jones
Industrial Average reaching new highs on a daily basis.
“They are going to more risky assets,” she said. “They are going
into the stock market. They are pursuing other forms of risk because
they need that money to live on.”
The contributing editor of RealClearMarkets.com, and a columnist for
the Washington Examiner, MarketWatch.com, and Tax Notes added that
Fed policy is also devaluing the currency and raising the prices of
commodities such as oil, leading to higher prices for gasoline,
grains and food.
“[Fed] Chairman Ben Bernanke is very well intentioned, but his
policies, I believe, have certain unintended consequences,” she
said.
Furchtgott-Roth is clearly not caught up in the euphoria of the
recent runup in stocks.
“I’m all in favor of the Dow Jones at an all-time high,” she said.
“I would be a little bit happy if I knew it was based on solid
finances and that it wasn’t a bubble. [Bernanke] is reflating the
stock market. He’s reflating the housing market … but that doesn’t
necessarily mean this is based on substance. This might be a bubble
that is going to pop and people should be aware of that.”
She elaborated on the subject of currency devaluation.
“No country has ever devalued its currency as a way to prosperity,”
she said. “If that were possible, then all a country would have to
do is devalue its currency and … it would get rich. A strong
currency … would pull in more investors. The prices of commodities
would go down. Growth would be based on substance rather than on
inflationary gains.”
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