Monday, April 11, 2016

Bonddad Monday Linkfest

We'll be doing our regular Monthly economic review on Thursday, April 28th at 3PM CST.  You can sign up at this link.

Great overall summation of the current economic and market environment (SA)
Paul Ryans Parallel campaign (NYT)
GOP really doesn't want Trump (NYT)
Major donors aren't donating (Politico)
Why no boost from oil prices (James Hamilton)
Bond defaults at highest level since the Great Recession (FT)
Will this be the year for TIPS (FT)

Not nearly enough attention has been paid to the toll these low rates — and now negative rates — are taking on the ability of investors to save and plan for the future. People need to invest more today to achieve their desired annual retirement income in the future. For example, a 35-year-old looking to generate $48,000 per year in retirement income beginning at age 65 would need to invest $178,000 today in a 5% interest rate environment. In a 2% interest rate environment, however, that individual would need to invest $563,000 (or 3.2 times as much) to achieve the same outcome in retirement.

This reality has profound implications for economic growth: consumers saving for retirement need to reduce spending if they are going to reach their retirement income goals and retirees with lower incomes will need to cut consumption as well. A monetary policy intended to spark growth, then, in fact, risks reducing consumer spending.