The net effect of keeping interest rates at zero while promoting inflation is a reduction in the value of savings.  If you have money in the bank, and interest rates are pegged at near zero and inflation is at the Federal Reserve’s desired “over 2%” level, the value of your savings declines by that increment.

Not a difficult calculation, yet the citizens of this country, the holders of its currency, don’t seem to grasp the concept.  There are people in the Federal Reserve that are encouraging this “tax” on savings, damaging the currency, and doing so in direct conflict with the mission statement of the Federal Reserve.

The Federal Reserve’s mission statement includes this language: 

“…conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.” 

Note the phrase “stable prices.”

Chicago Fed President Charles Evans said in remarks prepared for delivery in Stockholm,  "Policy should be sufficiently accommodative so that ... the odds should favor modestly overshooting our 2 percent target sometime in the medium term.”  He also is in favor of keeping interest rates just above zero.

Chicago Fed President Charles Evans, with his prompting of inflation, violates the mission statement directive of promoting “stable prices”.  He suggests promoting quite the opposite. The curiously powerful unelected Federal Reserve, which is not federal nor does it have any reserves, violates its own mission statement and draws a silent reaction.  Why?  Where is the outrage?

When Cyprus was in dire financial straights, the suggestion that savings be taxed was suggested and subsequently, and correctly, met with outrage.  Theft was a word that was used.  The Federal Reserve’s promoting inflation while simultaneously keeping interest rates pegged near zero is theft as well. 

And for those who are a little light on savings and say “so what,” may I point out that your income stream, the money you are about to make, would be worth about 2%  less as well.

Six years of near zero interest rates, with inflation at 1 to 1.5%, rates below the Fed target, is circa 9%, not accounting for compounding.  Isn’t that just what we experienced?  How much more stealing from savers, and the middle class, can the country stand?

I guess the quick and simple calculation hides the net effect from people who are challenged by math.  But it may also explain why the middle class is in decline.  A fair return on saved money is an economic engine that provides income and discretionary spending.  The Federal Reserve is prohibiting both.  Question these people.  Question the Federal Reserve.