Real Net Personal Interest Income Growth

Click to enlarge.

That's a fairly impressive downdraft (in blue), especially if one considers just how much money is out there to earn interest.

1. ZIRP once helped borrowers, especially long-term borrowers with good credit who managed to refinance their homes at much lower interest rates. I'm not so sure it is helping many now though. Credit card interest rates have certainly not fallen much in the last 10 years.

2. ZIRP continues to hurt savers, especially short-term savers who patiently wait for the end of ZIRP.

“Patience – A minor form of despair, disguised as a virtue.” - Ambrose Bierce, The Unabridged Devil's Dictionary

Let me assure you that I generally have plenty of patience and despair, but not nearly enough to sit in treasury bills long-term. I've been a permabear since 2004. In hindsight, sitting in treasury bills would have been an awful plan.

From what I can see, the "average" American currently earns 5x more interest than he/she pays. As monetary economic stimulus goes, at some point ZIRP could easily hurt savers far more than it helps borrowers. We may have already reached that point, just like Japan before us.

As a side note, I really don't think the typical American is personally earning 5x more interest than what is paid. Toss a few billionaires into any party and the average starts looking pretty good. That's not enough to make the typical American rich though, unless streams of cash spill out of pockets as the billionaires wander around the room. You know, trickle-down economics and what not. Cash falling out of billionaire pockets is about as likely to happen as the end of ZIRP, at least in the near-term.

I will end here with 100% certainty. I am a long-term retired saver and the Fed's zero interest rate policy is forcing me to spend less than I otherwise would, lest my nest egg run dry before I die of old age. It's not a complaint. It's simply a fact. Spending less is a rational reaction to lower real yields. That's not what the Fed intended me to do of course. Call it an unintended consequence. This uncertain world is full of them.

Source Data:
St. Louis Fed: Custom Chart