Furchtgott-Roth to Moneynews: Fed Low-Rate Tactics Push Senior Citizens Into Stocks

Monday, 18 Mar 2013 08:04 AM

By Glenn J. Kalinoski and Steve Cortes

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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.

Watch our exclusive video. Story continues below.



Editor's Note: A full, unedited version of this interview is available exclusively to Financial Braintrust Alliance subscribers. Visit www.fbtalliance.com for more information and to sign up.

“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.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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.”

Editor’s Note: Put the World’s Top Financial Minds to Work for You

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