Financial Repression Steals Trillions Per Year From Savers & Retirees To Save TBTF Governments

Wolf Richter of Wolfstreet.com actually ran the numbers of how much governments steal per year through financial repression from savers and retirees in the US alone.

So now we have this situation where short-term Treasury yields are low, and long-dated Treasury yields are even lower.

How much money are we talking about here? Let’s see. There are $22 trillion in Treasury securities. They’re held by individuals and institutions, including insurance companies, pension funds, and the Social Security Trust Fund.

Then there is high-grade corporate debt. The category of triple-A to single-A-rated debt is about $3.3 trillion. These yields have been pushed down too.

Then there are $3.8 trillion in municipal bonds outstanding. Many of them trade below US Treasury yields. For example, the GO bonds of California, which is not exactly a paragon of fiscal rectitude. During trading last Thursday, the California 10-year yield was 1.76%. This was about one-third of a percentage point below the US Treasury 10-year yield of 2.08% on the same day.

Then there are $9.4 trillion in savings products, mostly savings accounts and CDs at banks. There are also about $3 trillion in checking accounts, payroll accounts, etc., but they’re not included here. These are just savings products.

So let’s add these categories up: They amount to $39 trillion.

A 1% reduction in interest spread across the board of just these four categories amounts to nearly $400 billion a year, that the holders of these products are being deprived of.

A 2% difference in yields across the board takes nearly $800 billion a year in income from savers, current and future retirees, and fixed income investors, and hands this money to borrowers.