Letter: The "0% Generation"

From January, 2002 until January 2022 the Federal Reserve kept interest rates near 0%. Except for a few years of before the pandemic, when it rose to 2.4%, there had been a distortion of the normal interest rates from the historical average of 5.5%, which is where it is now.

For most of the last 50 years the inflation rate has been below the Fed Fund Rate, making is prudent to save money. But during the time I'll call the "0% Generation", the inflation rate was above the fund rate. It made more sense to spend. Now that the equilibrium must re-established, it makes more sense to save, something the "0% Generation" of consumers are not used to.

This analysis is difficult to bring to voters. No president of the United States will be able to bring down food prices, the price of gasoline or other assets. The federal bondholders need to make money. The "0% Generation" spending expectations can't continue. It's time to cut back.

Matt Somers

Midtown

Disclaimer: As submitted to the Arizona Daily Star.