WE’VE BEEN ZIRPED:

Father-son talks are always difficult, but it was time to teach my teenager about how things work. I dragged him to our local branch of Wells Fargo and opened a checking account with ATM card privileges and a savings account where he deposited his hard-earned umpiring cash. Having worked on Wall Street for 25 years, I stroked my chin and provided some sage advice: Checking accounts don’t pay interest, so keep your money in the savings account and just move it to checking when you need it. None other than Albert Einstein, I noted, said, “compound interest is the most powerful force in the universe.”

His first bank statement showed interest income of $0.01​—​and a series of $35 fees for insufficient funds, wiping out all his money. I got a “You’re a financial genius, Dad,” dripping with sarcasm.

My son got ZIRPed. Senior citizens living on fixed incomes are getting ZIRPed. We all are. Since December 2008, when Ben Bernanke’s Federal Reserve started buying mortgage backed securities in order to “solve” the financial crisis, we have all been subject to a zero interest rate policy. . . .

Conceptually, ZIRP has worked. The stock market is up 12 percent in 2012. Bank stocks like Bank of America’s have doubled off their lows. Real estate investment trusts, or REITs, are up 15 percent. Yet in the real world, ZIRP is a huge FAIL. GDP growth in 2012 will come in at an anemic 2 percent after a 1.7 percent tick up in 2011. ZIRP is not growing the economy. And no growth means no jobs.

Unemployment is still a nasty 7.7 percent. And talk in hushed tones to Wall Street hedge funds, and they may explain the dollar carry trade, the one where you borrow or even short U.S. dollars and buy currencies, bonds, and stocks in higher yielding, emerging market countries​—​yes, the Fed is stimulating, but in places like India, South Africa, and Brazil. . . . Savers are getting ripped off. Interest rates are near zero, yet the inflation rate as of October 2012 was 2.2 percent, which means real interest rates are negative 2 percent, so savings are being diluted by 2 percent a year. It’s a stealth, non-voted-on tax, maybe as much as $200-300 billion a year.

It’s behind the Senior Squeeze.