Reader gives a lesson in economics 101 about Wall Street speculators and savers

Published 12:00 am Thursday, May 8, 2008

Dear editor,

In 1963 at Huntingdon College, Montgomery, I took a course in the dismal science, namely economics 101.

I had no idea at that time that 45 years later what I learned would serve me today.

This concerns the small savers of America, you know, the people who save and expect to get a reasonable rate of return on their investment and who have a very small tolerance for risk.

I was taught that there was Adam Smith’s invisible hand, the concept that the markets will regulate themselves, by an invisible hand.

I was taught that there was the doctrine of

laissez faire, that if the government would leave it alone, the markets would flourish.

I was taught that despite Malthusian gloom, that prosperity would prevail – not withstanding that population growth might be very high.

I was taught the theories of John Maynard Keyes – that the regulation of money was divided into two separate spheres: monetary policy which raise interest rates in times of inflation and lowers interest rates in times of depression and governmental regulation (fiscal policy which lowers taxes, and increases spending in times of depression to be paid for by increasing the national debt) and by increasing taxes and decreases spending in times of inflation.

All of the foregoing has been said so that this may be said: All of the above mentioned theories have been discarded by our political leaders.

And this is because

the greedy Wall Street investment bankers who made loans to people who made perhaps small salaries could buy an expensive house.

The fault, dear Brutus, lie not in the stars, but in ourselves.

Now the chickens have come home to roost.

When the arm, the adjustable rate mortgage kicked in, people could no longer pay their monthly payments: foreclosures started to escalate.

To support the Wall Street people, interest rates were lowered to a pittance.

Every night on national news I hear how everyone bleeds for the people losing their homes, people who overbought, how with these reduced rates, Wall Street folks are smiling at the governmental largesse.

But I have not heard any sympathy for the people like me, the small savers who buy certificates of deposits, expecting a reasonable return.

Now days, one is fortunate to get, say, 3.0 percent on his money.

The question for me is: Why should I have to pay for the Wall Street greed and the stupidity of people who purchased homes way out of their price range?

Savers like me are being forced to pay for other people’s sins.

Why don’t the news people bleed for me?

I have not heard one “fiddle dee dee” from anyone of these learned gentlemen.

Finally, let us say that all of the small savers like me decided to no longer save, but to spend all of our savings and not only that but to spend all of our current income:

What would the consequences be?

I am not educated enough to know the answer.

But I have enough sense to know that we the small savers of the United States are being ripped off.

Thad Bruner

Selma, Alabama