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accounts in banks earning around 5 percent interest end up with negative savings or a net loss after income taxes on interest and inflation are taken into account.
“How do you encourage people to save?” he asked. “I feel foolish telling groups to save.”
In western European nations, he pointed out, the governments allow the first several hundred dollars in interest to remain tax free, but this is not the case in the United States.
Instead of saving, people are borrowing money and planning to pay it back in cheaper dollars without worrying about whether they will have adequate income to do so.
“This is all part of the inflation psychology which is so disruptive,” Lareau said.
What is emerging from all of this, Lareau said, is that there is no real guarantee* that savings or payouts for social security in the next 10 years will keep up with inflation as it has done in the past. There may not be enough money, or the fight over it may become so acrimonious that nothing is done to keep up with inflation. This might be a standoff
“That will not mean that
95.6%